BAD DEBTS AND PROVISION

FOR BAD(DOUBTFUL)
DEBTS. SLO 5.4
 IMPORTANT TERMS
 Debts : Amount receiveable by the business from its debtors is known as debts.

 Bad Debts : The debts, which are irrecoverable from the debtors, are called bad debts and the
concerned debtors are called bad debtors.
 Doubtful Debts : The debts, the recovery of which is doubtful or uncertain are known as doubtful
debts. It is expected loss of the business.
 Provision : Provisions are funds set aside by a business to cover specific anticipated future
expenses or other financial impacts
 Provision for doubtful debts : The provision which is maintained for the doubtful debts in future
is known as provision for doubtful debts or allowance for uncollectable.
BAD DEBTS WRITTEN OFF

• Direct Written off Method

• Provision Method
CASES - SITUATIONS

• When only account receivable and % of provision is given ( case no 1)

• When account receivable , opening balance of provision of doubtful debts

is given ( Case no 2)
CASE NO 1

• On 31st December 2015 account receivable was Rs.150000. It was decided that 5%
provision for doubtful debts would be take
CASE NO 2

• On 31st December 2015 account receivable was Rs.150000 and provision for doubtful
debts was Rs.5000. Further 5% provision for doubtful debts will be taken.