- provision for doubtful debts should be brought up to 5% on debtors.
- how can we find in the question that we have to find hidden g/w?
Provision for doubtful debts should be brought up to 5% on debtors implies that new provision is to be made @5% on the amount of debtors.
For example, old/existing provision for doubtful debts amounted to Rs 1,000 and the new provision @ 5% comes to Rs 1,500. In this case, there is an increase in the amount of provision by Rs 500 (1,500 - 1,000). This increase in provision will be shown on the debit side of the Revaluation Account and also, the new provision (here, Rs 1,500) will be deducted from the Debtors in the New Balance Sheet.
At the time of admission, the new partner usually brings his/her share of goodwill. In case his/her share of goodwill is not mentioned in the question, then it is considered as a case of Hidden Goodwill.
In other words, in case of Hidden Goodwill, the value of goodwill is not mentioned at the time of admission of a new partner. This is more prominent in cases, where the new partner does not bring his/her share of goodwill in cash. In such cases, goodwill of the firm remains hidden and the value of the firm's goodwill is determined by taking the difference between the capitalised value of the firm and the net worth of the firm.
For more clarity of this topic, you can go through Lesson 4- Chapter 2 of Book 1 of our study material.