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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 / 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.
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