Reserve or provision

Dear Soniya,

Bad Debt is the actual Bad Debt…i.e a debt which has actually turned bad.

However, Reserve for Bad Debt is the reserve created inorder to safeguard the loss due to a debt turning Bad. It is created n anticipation that a certain debt may become bad

Provision for Bad Debt is the provision for the bad debts.

Provision is a charge against P/L and Reserve is an appropriation of the profits

Dear Soniya mam,

It is actually a Reserve, not a provision, read this, you will get answer:-

Bad Debt Reserve:- An account set aside by a company to account for and offset losses that arise as a result of defaults from futures loans. This figure may be calculated based on historical norms or other known information about the relative safety of the debt.

Reserves are generally set-aside by the company for some purpose, like bad debt reserve, capital reserve, general reserve etc...

Best Regards,
CA Lovely Arora
ca.lovelyarora @ gmail.com
 

Soniyaji,

It is actually a Provision which is created by debiting to P&L a/c.

The basic difference between Provision and Reserve is that in Reserve you debit to P&L Appropriation a/c whereas in Provision you debit to P&L a/c.

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all above is right