Bad debts treatment

This discussion clarifies the accounting treatment for bad debts. It explains that for registered companies, a provision for bad debts should be created before writing off, while sole proprietors or firms can write off directly. The correct journal entries involve debiting the bad debts expense account and crediting the party's ledger. While bad debts are treated as an indirect expense and impact financial statements, they generally do not affect GST turnover or 26AS directly, though they need to be reported in GSTR-9.