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Bad debts

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(Querist)
12 February 2012 I want to know if a company finds its debtors turnover ratio goes up and it debtors days go beyond 90 & 120 days, what should it do?
can provide for bad debts on a presumptive basis? If so what is the criteria for the same? How to pass the necessary entries in regard to the same?
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CA Siddhartha Bhardwaj

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CA Siddhartha Bhardwaj (Expert)
12 May 2012 The company can create a provision for bad debts.

Entry will be:

P&L A/c Dr
To Provision for Bad Debts

This provision will be disallowed at the time of calculating taxable income. Only actual bad debts are allowed for tax purposes.
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