Friends,
A provision for doubtful debt is appearing in accounts from 31 March 2010. Can you provide some insight when this can be adjusted in financial statements and how. Is there any mandatory period. Will the adjustment entry be :
Provision for doubtful debt
To Sundry debtors
Regards,
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.
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