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What will be the treatment of bad debts, provision for bad debts which shown in the trial balance and new provision for bad debts in adjustments?

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Question added by Kripesh Krishnan Kutty Nair , Merchandiser , Al Seer Group
Date Posted: 2013/07/05
manaf almas
by manaf almas , Auditor , DAR AL NUZUM PUBLIC ACCOUNTANTS

bad debts should be debited in current year profit & loss account , traial balance provision referes to provision for bad debts for this year and which is created previous year.new provision means provision for next year which have to make this year and deducted this amount from account receivables(debtors)in balance sheeet.If old provision amount is excess amount than actual bad debts then only deduct balance amount from debtors for making new provision provision amount would be treated as liability in balancesheet under the head current liability and provision and debit profit and loss account for eg; In case provision amount is1000 as per company policy old provision1000 bad debts800 deductable amount from account receivables this year=new provision-(old provision-bad debts)1000-(1000-800) =1000-200 =800

ABDUL RAJA MOHAMED
by ABDUL RAJA MOHAMED , Cosultant , Self emloyed

Accounts Receivable is reported in Balance Sheet at its net realizable value.
This can be achieved by a contra account called provision for bad debts.
The journal entry is debit to bad debt expense and credit to provision for bad debts.
After time pass-by and when it is assured that you will never collect that receivable, then make permanent write-off by debit to provision for bad debts and credit to Accounts Receivable.

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