Question information is given as under ,
Information given in Trial balnce for the year ended dec ,31st
Allowance for doubtful debts (Cr) 3000
Accounts reciveable 180,000
Adjustment given,
Doubtful debts for the year were estimated to be Rs 1000,
Please told me the adjusting entry
As given in book is
Provision for doubtful debts DR 2000
Recovery from excess provisions CR 2000
Please explain this entry given by the book [/B]

I think you are reading from a British book or an Indian book. However, just to help you understand the logic behind the scenario I would like to suggest that since the original estimate for doubtful debts was estimated at 3,000 last year and it appears as such in the trial balance.

The company now estimates that the possible doubtful debts in the next year will be 1,000 there is therefore an excess provision of 2,000. This will require reduction of 2,000 in the provision account. This recovery appears as an income in the profit and loss account.

Now, the question is what about actual bad debts that may have occurred during the year. If you study the trial balance properly, there will be a separate line item showing bad debts written off and perhaps bad debts to be written off in the list of adjustments. These appear separately in the profit and loss account as an expense item.

The apparent logic behind these two entries is that the British authors prefer reporting loss arising from actual write offs and gain or loss arising from estimates.