Question

Why is provision for doubtful debtd created?how is to shown in balance sheet?explain

Answer 1

provision for doubtful debt is created when there is a possibility to not receive the money from the debtors. it is not an actual expense or loss incured during the year. It is taken as an expense based on the concept all anticipated losses is to be accounted. the amount of provision are an estimated figure only it may vary depending upon the circumstances.

treatment in balance sheet

it will be deducted from the balance of debtors in the balance sheet as follows,

Debtors. ×××

(-)bad debt. (×××)

×××

(-) provision

for bad debt. (×××). ×××