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 Posted / 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)
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