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Bad debt and provision for doubtful debts

Shikha (Student ) (35 Points)

06 May 2018

Hi everyone,

While going through annual reports of some companies, i have noticed that the amount debited from profit and loss statement for provision of doubtful debts is less than the actual provision created( as seen as a deduction from trade receviables). I wanted to know what are the possible cases when such a thing can happen.

Thanks.

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6 Replies

satish (teaching) (2046 Points)
Replied 06 May 2018

1. check there should be some opening prob for doubtful debts.
2. no bad debts during the year, chance to create further provision for doubtful debts by the end of the year.

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Shikha (Student ) (35 Points)
Replied 06 May 2018

Attaching file with screenshots for reference,

According to this provision should be created of (114.29-20) 94.29, but in profit and loss we can find provision of only 81.82.

Attached File : 2411128 20180506082502 document1.doc downloaded: 71 times

Tarun Kumar (Chartered Accountant) (180 Points)
Replied 06 May 2018

Making provision for doubtful debts and actual bad debts, both are different things You are estimating that some of amount will be unrecoverable for which you’re making provision and deducting from receivables but if in this estimation you realise that some of amount will not recover actually then you have to debited this amount in your profits and loss account so here may be a gap between amounts

Shikha (Student ) (35 Points)
Replied 06 May 2018

If that is the case how does the A = L + E match ?

Equity goes down by 81.82. Asset goes doen by 94.29(net) ?

Ravi SADhiyan (Practice) (4510 Points)
Replied 29 June 2018

Originally posted by : Shikha
	Hi everyone, While going through annual reports of some companies, i have noticed that the amount debited from profit and loss statement for provision of doubtful debts is less than the actual provision created( as seen as a deduction from trade receviables). I wanted to know what are the possible cases when such a thing can happen. Thanks.

This Thing can't be happen

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 01 February 2022

I don't like to drive all time. It makes people weak. People who will go into debt, in india, are advised to travel by two wheelers. The clients may not like it to deal with a poor guy, but the clients, owners, creditors etc are self sufficient and pooooor. So be safe and never show off must be the motto and governments must provide protection