What is the difference between Bad Debt and Provision for Doubtful Debt? Please explain with entries... Thanks in advance..
24 Replies
Vivek Raju P
(Manager)
(614 Points)
Replied 05 January 2011
Bad debts are those which are hopeless and are written off from the books.
Bad Debts Dr
Sundry Drs Cr
Provision is done for cases which are overdue but still can be persued for collection though difficult.
Suresh Prasad
(www.aubsp.com)
(15630 Points)
Replied 05 January 2011
Accounts receivable that is unlikely to be paid and is treated as loss. A firm may use one of the two methods in writing off such losses against its sales revenue:
- by deducting the uncollectible amounts from revenue in the accounting period they are deemed uncollectible ,
undefined
or
2. by deducting an estimated amount from revenue in each accounting period and adjusting any excess or shortfall in the following accounting period . The ratio of bad debt losses and the open account (credit) sales is an indicator of the quality of a firmundefineds collectibles, and the efficiency of its credit monitoring efforts. Also called uncollectible account.
Lakshmi
(Student)
(1836 Points)
Replied 06 January 2011
A debt that is not collectible and therefore worthless to the creditor. This occurs after all attempts are made to collect on the debt. Bad debt is usually a product of the debtor going into bankruptcy or where the additional cost of pursuing the debt is more than the amount the creditor could collect. This debt, once considered to be bad, will be written off by the company as an expense
The provision for bad debts might refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for Doubtful Accounts, or Allowance for Uncollectible Accounts. In this case Provision for Bad Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order to report the net realizable value of the accounts receivable.
Provision for Bad Debts might also be an the income statement account also known as Bad Debt Expense or Uncollectible Account Expense. In this situation, the Provision for Bad Debts reports the credit losses that pertain to the period shown on the income statement
Mohit Srivastava
(Article)
(131 Points)
Replied 06 January 2011
Hi,
Basicly Debtors are classified as three type as
GOOD DEBTORS BAD DEBTORS DOUBTFULL DEBTORS
BAD dr are those from whom there is no hope to recover the due so entry will be
bad debtd dr
To Debtors
Doubt Full Debts are those from whome due money can be recoverOR it can be doubtfull to recover so we need to make a Provisior for this.Entry will be as
P & L a/c dr
To Provision For Doubt Full Debts
It Is helpfull to us that we should make Provision For Both type of debtors as per BASIC ACCOUNTIN ASSUMPTION of CONSERVATION , & PRUDENCE
Learner
(Student)
(409 Points)
Replied 06 January 2011
If provision was made for doubtful debt in the previous year by passing
P&L a/c Dr
To Provision for doubtful debts.
If bad debt is confirmed in the next year, wat entry should be passed in the books?
CA Ganesh Karthik
(Chartered Accountant)
(368 Points)
Replied 06 January 2011
In simple words, when you're sure about the non-recovery, its a bad debt.
When you expect a that you'll not recover, you create a provision.
Learner
(Student)
(409 Points)
Replied 06 January 2011
when we're sure about the non-recovery, its a bad debt, i.e,. deduct from debtors or receivables.
when we're in doubt of recovery, we create a provision i.e. P&L a/c DR Provisions CR
when we made provision, we didn't deduct anything from Debtors. After provision for doubtful debt created if bad debt is confirmed, what entry should be passed?
Jithin
(Learner)
(1057 Points)
Replied 06 January 2011
| Originally posted by : Santhu | ||
 |
If provision was made for doubtful debt in the previous year by passing P&L a/c Dr To Provision for doubtful debts. If bad debt is confirmed in the next year, wat entry should be passed in the books? |
 |
When bad debts are confirmed, we should deduct the bad debts from debtors.
Bad Debts a/c Dr.
To Debtors a/c
We no longer need to provide for the bad debts above, so the following entry is passed:
Provision for Doubtful Debts a/c Dr.
To Bad Debts a/c
CA Hemadri
(CA)
(21 Points)
Replied 07 January 2011
bad debt is an known current liability where as provision for bad debt is for unknown liability
Sanjeev Sandh
(Senior Manager - Audit)
(309 Points)
Replied 28 April 2011
When you are absolutely certain that a debt cannot be recovered, then it is a bad debt. When you have resonably doubt that the debt is not fully/partly recoverable, the you make a provision for doubtful debts.
Raj
(Assistant)
(56 Points)
Replied 28 April 2011
Provision for bad debts, Bad debts / bad debts written off ...these Ledgers are under which group in tally ?...What is the right method to calculate Provision for bad debts? How we treat recovery of bad debts that already written off ? year back ? and how it effects in profit?
shrikant
(Accounts Manager)
(44 Points)
Replied 30 April 2011
| Originally posted by : Santhu | ||
|
|
What is the difference between Bad Debt and Provision for Doubtful Debt? Please explain with entries... Thanks in advance.. |
|
1)Bad debts are those which are confirm non-recovarable. entry as under:
Bad Debts A/c. Dr
To Sundry Debtors A/c Cr
(Note Bad debts a/c. reflect to P/L Ac under indirect expenses)
2) when we're in doubt of recovery of some doutfull debtors the we have make provision against the same. entry as under:
Bad Debts A/c Dr
To Provision for Bad Debts Cr
C.A.M.S.ROY
(C. A.)
(478 Points)
Replied 02 May 2011
bAD DEBTS MEANS AMOUNT WHICH cannot be recovered from the debtors,in this case entry will be , Bad dedts -Dr, debtors-Cr, On the other hand hand ,provision is the amount which recovery is suspectible.
entry will be P/L -dr, Provision for doubtful- Cr
When bad debts is confirmed in the next year and provision exist, then such bad debts amount will be debited to provision A/c or directly to the p/l A/c and corresponding credit is given to debtors A/c
Ranjini
(Accountant)
(98 Points)
Replied 02 October 2013
Hi
Under Which head of account i should create provision for bad debts in tally
Regards
Ranjini
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