Accounting




August 24, 2007

What is the provision for bad debts?

The provision for bad debts might refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for Doubtful Accounts, or Allowance for Uncollectible Accounts. In this case Provision for Bad Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order to report the net realizable value of the accounts receivable.

Provision for Bad Debts might also be an the income statement account also known as Bad Debt Expense or Uncollectible Account Expense. In this situation, the Provision for Bad Debts reports the credit losses that pertain to the period shown on the income statement.






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Comments

11 Responses to “What is the provision for bad debts?”

  1. Shelly on March 11th, 2008 12:38 pm

    Very helpful…but should have examples

  2. sampath kumar on March 28th, 2008 3:43 am

    whsat is the Journal Entry for Bad debts and Provision for Doubtful Debts. Show separately.-

  3. Tanzeem on May 7th, 2008 2:33 pm

    Please explain me depreciation in details with journal entries.and bad debts provision

  4. Rogers James Lutwama on May 12th, 2008 9:22 am

    This is very useful for my daily work. Thanks a lot.

  5. gayu on July 31st, 2008 1:36 am

    please explain 3 methods of bad and doubtful provision

  6. bianca on August 11th, 2008 12:53 am

    goo dbut should include a revision kit

  7. Robert on September 11th, 2008 7:44 am

    Provisions are debit in the P & L initially and adjusted there after for increases or decreases.Now, what happens to the funds in that account?

  8. Elaine on September 16th, 2008 10:55 pm

    What is the difference between provision for bad debts & bad debts written off? Is it same?

  9. sandip on October 16th, 2008 4:08 am

    Provision for bad debts is like a reserve created for any specific purpose i.e.,Bad debt.It shows himself as expenses but its a fund created to adjust the bad debts.when the Provision is created then the entry is Profit & Loss A/c - - - - - Dr.
    To Provision for Bad Debts.

    And when bad Debt is actually happen then it is adjusted with the Provision for Bad Debt Accounts & the entry is

    Provision for Bad Debts - - - - - - Dr.
    To bad debt A/c

  10. chmero on October 17th, 2008 2:30 pm

    I an allownace for doubtful accounts a contra-asset or a liability?

  11. Loquif on November 11th, 2008 9:34 am

    Clear and simple! just what I wanted, thanks!

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