wheather baddebts has to take under indirect expenses or provisions for baddebts
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Bad debts
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you need to take provision for bed debts
If proision or bad debts has been created in the books of accounts, debit bad debts to prov. for b/d a/c, otherwise treat debit directly to P/L a/c.
There are two scenarios
1. If it is 100% known that a debtor is insolvent or not able to pay the amount due, then
Bad debts(indirect expenses) a/c Dr. xxxxx
Sundry Debtors a/c Cr. xxxxx
2. If it is not sure about his insolvency and the situation is that u are more than not likely to receive the amount from debtors,then
Bad debts(indirect expenses) a/c Dr. xxxxx
Provision for bad and doubtful debts(current liabilities) a/c Cr. xxxxxx
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