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.
About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.
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38 Responses to “What is the provision for bad debts?”
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Very helpful…but should have examples
whsat is the Journal Entry for Bad debts and Provision for Doubtful Debts. Show separately.-
Please explain me depreciation in details with journal entries.and bad debts provision
This is very useful for my daily work. Thanks a lot.
please explain 3 methods of bad and doubtful provision
goo dbut should include a revision kit
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?
What is the difference between provision for bad debts & bad debts written off? Is it same?
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
I an allownace for doubtful accounts a contra-asset or a liability?
Clear and simple! just what I wanted, thanks!
is that provision will reverse in the next month?
Why should we deduct in balancesheet from Debtors, why not directly credited to Debtors A/c. Can anybody help on this ?
what if there was a provision already made int he previous year and and then the questions asks to calculate the proviosion for this year
can you speak chinese
brilliant i have learnt a lot
hi
the question is i wanna close the year 2008 do i have to take provisions for 2009 or 2008 i mean for the accounts of 08 or 09
thanks in advnace
thanks alot.your qs are very clear and direct this is the most educating site i ever know
dahiru from nigeria
I was made provision for bad debt rs 5000
But actual bad debt in 7000 so u will reply me quick how to setoff
there is no entries in this context so please show the journal entry for provision. only explainations are there
Please give me an example provision bad debts shown on balance sheet and income statement. Thanks.
Provisision for bad debt is a simple concept.
If you have debts which you deem to be bad or doubtful (meaning that these debts will not be repaid, in all likelihood), you can create what is known as a provision.
A provision is a charge to the profit and loss account (debit, profit and loss) and is a liability (credit) on the balance sheet.
Dr : P&L account (bad debts)
Cr : Bal Sheet (provision for bad debts)
When the debt is actually written off on the debtor account - the enry is debit sales (profit and loss) and credit debtor account.
To compensate for that write off, you can then release the same amount from the provision (for bad debt) by : debit provision for bad debts (bal sheet) , credit bad debt
(P&L).
Why does a business create a provision for doubtful debts?
this is more than amazing as it pertains accouting for provision for bad debt.
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bad debt is created when debtors are not able to pay dues on time there are three methods of creating bad debt provisions.
note : earlier accountants were also not sure about bad debs . in America the accountants have adjusted bad debt
it means bd and bdr . BD is debited to p&l
while BDR is deducted frm sundry debtors and added to bd . due to uncertainity of dbtors payment provision should be made by each firm . depending upon the seize of business . few companies have fixed certain percentage of sales as a bad debt provision . bad dept provision can be adusted by opting real debt of company
Can you tell me the different for book write-off and physical write-off for bad debt?
Sir,
This is outsanding site chemendus and very helpful for those students who little bit intouch in accounting but they are not clear. Now with this site they solve the problem just one click and they will give the right result with in few sentences.
thanks blog.accountingcoach
Sadaqat Ali
Finance Manager
If the aging was off, where would one look to correct the problem?
lo people not helping
wheres the example????
What are the component of tier II capital?
Can someone please take out time to show the accounting entries for bad and doubtful debts, I mean their journal entries and save us the time of reading through much vabiage.
I think this site is a wonderful site.
See the Explanation of Accounts Receivable and Bad Debts Expense on AccountingCoach.com.
What are the difference between provision for bad debt and doubtful debt
Should a provision for doubtful accounts be provided for current acccount?
We wrote off debt on an enterprise business and now we are selling some assets. How do we record the revenue back to our tribe?