Provision for doubtful debt

Hi..

These can be adjusted anytime when you have bad debts and there is no time limit as such.

Entry will be

Provision for Bad debts A/c .... dr

       To Bad debts A/c

In the books the entry passed before 3 years is

PL A/c

To Provision for doubtful debts

Thanks,

Provision for doubtful debts is made during the year end for expected non collection of receivables. There is no mandatory period as such, but as a matter of healthy practice, an account can be said to become bad, if there is no movement in that account for a year and recoverability from such party is highly doubtful. The entry for such provision would be

Profit and Loss A/c Dr.

              To Provision for bad and doubtful debts A/c

Such provision will be shown as a deduction from sundry debtors on the asset side of the balance sheet.

when such provision crystallizes into bad debts, then the same would be written off as Bad debts through the following entry.

Provision for bad and doubtful debts A/c Dr.

                         To Bad debts Ac.

 The below entry is posted to adjust the bad debts in the sundry debtors account

Bad Debts A/c. Dr

                To Sundry Debtors A/c.