K company is business selling second hand computers. If a computer develops a fault within 30 days of the sale. K company will repair it free of charge.
At 30 April 2014, K company had made a provision for repairs of $4,536. At 30 April 2015, K company calculated that the provision should be $702.
What entry should be made for the provision in K compnay's statement of profit or loss for the year to 30 April 2015?
Suggested Solutions
Provision Account
| DEBIT $ | CREDIT $ | ||
| Opening balance | 4,536 | ||
| Charges written back | 3,834 | ||
| Closing Balance | 702 |
Income statement
| DEBIT $ | CREDIT $ | ||
| Charges written back | 3,834 |