How do we treat Bad debts... how to create
provision/reserve for bad debts? show an example journal...
for creating provision and then writting off debtors
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Answer / akhtarzeb
treatement of Bad debts following is the example
Suppose Account Receivabel is 2000
at the of the year it has been estimated that 500 is bad
detdts
so it wil be calculate as
Account receivable-Bad debts
Bad dets Dr 500
Account Receivable Cr 500
it will be deducted from Account Receivable
Treatement of Provision or reserve for bad debts
Profits and lOSS a/c Dr
Reserve for bad debts Cr
Note Reserve for bad debts will be calculate from Profit
therefore profit and loss a/c will be debited
| Is This Answer Correct ? | 52 Yes | 28 No |
Bad debt is an operating expense. Creating reserve for bad debt:
For example: Total debtors $20000. Provide reserve for 7%.
Now creating reserve...
Bad debt account....... Dr. 1400
Reserve for bad debt account...... Cr. 1400
($20000*7%) This $1400 will be deducted from debtors & will
be shown on Profit & Loss account as an expense.
Now let us write off debtors for $500.
The journal will be:
Reserve for bad debt..... Dr. 500
Debtors account..... Cr. 500.
If the amount is recovered later then the entry will be:
Cash/Bank account..... Dr.
Reserve for bad debt account.... Cr.
| Is This Answer Correct ? | 14 Yes | 2 No |
Answer / harsha
the journal entry is
for bad debts journal entry
baddebts account dr
to debtors account
for provision for baddebts
bad debts account dr
to provision for bad debts
for writting of
provistion baddebts a/c dr
to baddebts account
| Is This Answer Correct ? | 24 Yes | 19 No |
Answer / h.r. sreepada bhagi
Bad and doubtful debts shall be taken care of while closing
the books of accounts periodically.
Example entry for bad debts:-
Bad debts written off Dr. (P&L A/c)
M/s.ABC Ltd.(Name of the Customer) Cr. (B/S A/c under CA)
Example entry for doubtful debts:-
Bad debts written off Dr. (This is a P&L A/c)
Provision for bad debts Cr. (B/S A/c)
In case a debt written off in the earlier year is recovered
in a later year, the following entry can be passed.
Provision for bad debts Dr. (B/S A/c)
To Bank A/c or Cash A/c Cr. (B/S A/c)
| Is This Answer Correct ? | 20 Yes | 15 No |
Answer / qasim
Every adjustment has two effects. Some time the two are
written together in Trading and Profit and Loss A/c or in the
Balance Sheet. Some times the effect is recorded in both
the T&P&L A/C and in the Balance Sheet.
Bad debts is a loss or expense of the business and it also
reduces the amount of debts which is an asset.
So bad debts are written on the debit side of Proft&L a/c
and are detucted from the debtors in the Balance Sheet.
| Is This Answer Correct ? | 6 Yes | 1 No |
Answer / rahul
Treatments of bad debts in financial accounts:-
A. Revenues should be reported net of discounts and allowances with the discount amount parenthetically disclosed on the face of the statement or in the notes to the financial statements. Alternatively, revenues may be reported gross with the related discounts and allowances reported directly beneath the revenueamount.
B. Provision must be made for bad debt estimates each year. Tuition and fees should be reported net of allowances and discounts. As such, increases in allowances for bad debts are recorded as a reduction in revenues rather than anexpense.
C. With regard to the presentation of the provision for bad debt estimates taken as a reduction of tuition and fee revenue, this should be deducted from the gross tuition and fee line item and should not be separately displayed on the face of the statement. This treatment is different than scholarship allowances which are required to be disclosed either on the face or in the notes to the financial statements
| Is This Answer Correct ? | 2 Yes | 1 No |
Answer / anto
it is according to various countries in US they follow a way
in india another ways. for example in india
| Is This Answer Correct ? | 3 Yes | 10 No |
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