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Provision for Bad and Doubtful Debts.

Why further bad debts are debited in sundry debtors as well as in provision for doubtful debt account? As provision was already there by deduct further bad debts from sundry as well as provision for doubtful debt account .

asked Nov 5, 2016 in Trial Balance, Profit & Loss Account and Balance Sheet by Kanchi (2 points) 670 views

1 Answer

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answered Nov 6, 2016 by jbsclasses (3,971 points)
Sir,but in 2015 we have already deducted provision for doubtful debt oc₹7000 from debtor's account in balance sheet so why we are deducting it twice. Also why we are not deducting bad debt of ₹5000 from it.

I hope your doubt is clear now.

Sir,why we didn't credited debtor's by ₹5000.
Debtors amounting to Rs.5,000 are appearing in Trial Balance.  It means the following entry has already been passed with regard to that:

Bad Debts A/c        Dr.    5000

   To Debtors A/c                         5000

This means Rs.5000 has already been deducted from debtors.  We have to pass journal entries only for what is given in adjustments.
Thank You so much sir
Sir what is the difference between provision and reserve
And is reserve come p&l account?

Let me explain you the difference between a Provision and Reserve.  For example a man earns Rs.50000 as salary every month.  Out of this amont he earmarks Rs.10,000 to be given to landlord as rent. Rs.5000 for his son's school fee, Rs.25000 for other household expenses.  He decides not to spent the remaining Rs.10,000 and keeps it as his saving.

In the above example money earmarked for rent, fees or household expenses are Provisions.  Money not earmarked for any known liability or expense is a Reserve (saving).

You can also read from the link given below: