Provision for doubtful debts

Any responses friends.

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

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.