26 December 2013
when we charge depriciation to provision account we do journal entry depriciation ac debit to provision
but charging to provision must lead to decrease in balance of provision as in case of bad debts being charged to provision for bad debts, provision balance decreases
but in charging dep to provision , depriciation balance increases why?
Really? are you comparing apples with oranges?? When to create provision for bad debts, you hit P&L account and not the bad debts account. At that point of provision increases.
What you are referring to is where debt actually become bad. That is subsequent to creation of provision.
Even in depreciation the same rule applies.
Remember it is at the time of creating provision and charging of to P&L or any reserve A/c, it leads to increase in provision. I don't know where you the got the notion of decrease. In depreciation case, the provision would reduce where you sell/discard the asset. So the corresponding provision would reversed to disposal account.
CAclubindia
