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Accounts

10 May 2007

I need to know the accounting treatment of provision for depreciation and bad debts. Its accounting from the beginning to writing off. Pls Help!!!!!!!!!!!!

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4 Replies

M.Sriram Shenoy (CA Final) (814 Points)
Replied 18 February 2008

Provision for depreciation is an account in which depreciation amount of assets in respect of every year is credited. This account, consequently appears on the liability side and assets will be shown at gross amount on the asset side of the Balance Sheet.

The journal entry would be;

DEBIT Depreciation A/c.
CREDIT Provision for Depreciation A/c.
(While providing for depreciation)

DEBIT P & L A/c.
CREDIT Depreciation A/c.
(Transferring it to P&L A/c.)

Bad debts are amounts lost or considered irrecoverable from debtors.This amount would have been shown as sales when effected. As now it is lost. it should be written off to P&L account. The journal entry would be;

DEBIT Bad debts A/c.
CREDIT Debtors A/c.
(Writing off bad debts)

DEBIT P&L A/c.
CREDIT Bad debts
(While transferring )

If the accounting policy is manintaining a provision account then;

DEBIT Bad debts A/c.
CREDIT Debtors A/c.

DEBIT Provision for bad debts A/c.
CREDIT Bad debts A/c.

DEBIT P&L A/c.
CREDIT Provision for bad debts A/c.
(to the extent written off)

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Srinivas Sharma KN (Tax Consultant) (292 Points)
Replied 18 February 2008

Sriram has explained in detail. Thank u, Sriram

M.Sriram Shenoy (CA Final) (814 Points)
Replied 18 February 2008

With pleasure sir. People willing to learn through this forum are always welcome.Let us make this place a better one to gain utmost knowledge. Let Lord GURU - The ultimate master of knowledge bless all of us. Jai GURU DEV.