wheather baddebts has to take under indirect expenses or provisions for baddebts
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Bad debts
Replies (3)
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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