Need help can any one explain ??

1. Some say Provision for Bad Debts is an Expense A/c, hence shown on debit side of P & L A/c. Others say its a Contra-Asset A/c (An Asset A/c having Cr. balance). But its not a Personal Account.

2. There is possibility that a debtor may prove bad to us. So, we will not recover any or some part of amout from him. Hence, we make a provision for it. It is nothing but a lock on funds to be used for some specific purpose. It is lockage of our own funds, so how can it be a liability? No way!

3. Locking the funds has to be done through P & L A/c, hence, that entry has to be made.

4. It is not shown on the Liability side of B/s, although it has Credit Balance. Instead it is netted off from Debtors to show the Debtors at a net value. This is just a presentation, actual debtors are not affected. They are only affected when there are actual bad debts. 

provision for bad debts neither comes under nominal acount nor real acount. though its charged to p&l a/c its a personal account as its amount of los from debtor. debtor becomes aset due to debit balance and but its not real acount though its current aset, its just a personal acount. as provision is related to debtor which comes under personal acount. and there are thre accounts.,real, nominal and personal. debtors is not material debtor is a persom who owes to busines,

baddebts - nominal acc prov for bad debts - (representative) personal acc

asset itself means debit balance which giv future benefits, liabiity is simply credit balance which busines owe to some one. So no there is no chance for any aset having cr balance. as the los due to debtor thats estimated nothing but future los on past experhence s not a expense so it does not come under NOMINAL A/C or REAL A/C, Any item under LIABILITIES in BALANCE SHEET comes only under PERSONAL A/C s. All items under ASETS in BALANCE SHEET must be REAL A/C or PERSONAL A/C. P&L A/C represents NOMINAL

Bhaavna Google For "Contra-Asset Account"! :)

 

P&L A/C represents NOMINAL OR REPRESENTATIVE. PERSONAL A/C (al provsions )

may be but my books and teachers taught me. comparing al views it seems to be only personal acc. refer to AS10 for the definition of ASET :):)

as u said above mam "

May be I'm wrong. Yes it can be a Personal Account. Yes I remember, we were taught all Provisions and Reserves are Personal A/c's but why they are so, it didn't come to my mind till now! :D

 

I have a better understanding now, may I can now elaborate in a clear way:

 

1. Why is Fixed Bank Deposit a personal A/c? Because when we deposit our money in a Bank, it becomes our Debtor, since its our money. Now here we are locking our funds in Bank, which is a third party, that's why it becomes a Personal A/c.

2. When it comes to Provisions, the situation is same, except the fact that we keep these locked funds with ourselves only and not with bank. Its like we become Debtor to ourselves only.

Ali, I hope Tewari clarified wich i was about to reply the same point.

Yes al provsions are perSonal accs. al Outstanding liabilites also coms under personal acc

Originally posted by : Ashish Tewani
	May be I'm wrong. Yes it can be a Personal Account. Yes I remember, we were taught all Provisions and Reserves are Personal A/c's but why they are so, it didn't come to my mind till now! :D   I have a better understanding now, may I can now elaborate in a clear way:   1. Why is Fixed Bank Deposit a personal A/c? Because when we deposit our money in a Bank, it becomes our Debtor, since its our money. Now here we are locking our funds in Bank, which is a third party, that's why it becomes a Personal A/c. 2. When it comes to Provisions, the situation is same, except the fact that we keep these locked funds with ourselves only and not with bank. Its like we become Debtor to ourselves only.

sir this 2nd point can u explain me again :)

1. What are Provisions?

Ans: Funds kept locked for some specific purpose under specific conditions.

 

2. Where are they kept?

Ans: They are with us in the form of Cash, Bank or Liquid Assets. (Mostly they are in form of Cash only)

 

3. Who is the owner?

Ans: We ourselves.

 

4. So which type of account should it be?

Ans: Personal.

 

Feel free to ask more, if any query remains! :)

Originally posted by : Ashish Tewani
	1. What are Provisions? Ans: Funds kept locked for some specific purpose under specific conditions.   2. Where are they kept? Ans: They are with us in the form of Cash, Bank or Liquid Assets. (Mostly they are in form of Cash only)   3. Who is the owner? Ans: We ourselves.   4. So which type of account should it be? Ans: Personal.   Feel free to ask more, if any query remains! :)

sir as per ur explainations can this journal entry be correct ?? (after u explained me i tried to make this journal entry is this correct?? i made this entry after going through all the explainaitions given by YoU and other respected members to my question :) ) pls tel me if iam correct and if i have understood the concept sir  :)

 

Mr X capital A/c     DR                                                              XX       --

         to provisions for bad debts/deprecion A/c                            --        XX