Allowance for doubtfull debt



I have a Customer who defaulted in payment due to shortage of funds. As per the contract, after giving him written notice, I filled a litigation against him. The case is pending with arbitrator and outcome of the same is unpredictable. Should I need to create a allowance for doubtfull debt? Whether this transaction is governed by AS - 4 or AS - 29? Moreover he also encashed the Bang Gaurantee provided, stating breach of contract on my Part. What should be proper accounting treatment for the same till the time litigation is pending ? ?

 
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