What is the difference between provision for bad debts and provision for doubtful debts?
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Difference between
Replies (2)
| Originally posted by : G.S. Arora | ||
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What is the difference between provision for bad debts and provision for doubtful debts? |
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Provision for doubtful debt indicates that certain debtors are expected to be bad debts and on date of preparation of balance sheet, such doubt persists.
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Provision for bad debt means certain debtors have become bad on the date of preparation balance sheet which were not bad debts till balance sheet date.
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Doubt |
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Provision for doubtful debt |
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31/3 (B/S date) |
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B/S preparation date |
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Bad Debt |
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Provision for bad debt |
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31/3 (B/S date) |
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B/S preparation date |
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Provision for Bad debts indicates , that certain debtors have become bad.. it is a sure loss, irrecoverable on a given date and is written off from the trade debtors. an over aged debtors usually turn out to be bad debtors.
provision for doubtful debts is created based on estimation that the certain percentage of debtors may turn out to be doubtful debts. a percentage is worked out based on the debtor's collection period and general economic environmen
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