What is the journal for bad debts provision and when bad debts recover?

There are two ways to account for the provision of bad debts: direct or allowance method

Under direct method:

Bad debts is only recognized when the accounts receivable is unlikely to be recovered.

Entry to record bad debts:

Dr. Bad Debts

  Cr. Accounts Receivable

When the bad debt is recovered, there will be 2 entries: 1. Reverse the bad debts provision and 2. Record the collection

1. Dr. Accounts Receivable

      Cr. Bad Debts

2. Dr. Cash

      Cr. Accounts Receivable

Under the allowance method, the company sets an estimate of accounts receivables. 

Journal entry for bad debts provision:

Dr. Bad Debts

  Cr. Provision for Bad Debts

When an account is found to be uncollectible, then that account will be written off. 

Entry to record write-off of bad debts:

Dr. Provision for Bad Debts

  Cr. Accounts Receivable

When the written off account is recovered, the entry to recover for bad debts is:

1. Dr. Provision for Bad Debts

     Cr. Accounts Receivable

2. Dr. Cash 

     Cr. Accounts Receivable

 

 

cash Dr

icome statement Cr

bad debt to a/c recievbl

To create a bad debts provision, journal entry would be Dr Bad-Debts expenses Cr Provision for Bad Debts When bad debts are recovered, entry to be passed would be Dr Provision for Bad Debts Cr Other Income

ENTRY  FOR  BAD  DEBT  PROVISION  IS 

BAD  DEBT  Expenses  A/c      Dr

Provision  for  Bad  Debt  A/c   Cr.  

When  debt   is  collected  than  entry  will be  as  follows  After  the recovery  of  amt  

Cash  / Bank  A/c  Dr

Receivable/Debtor  A/c  Cr

 

cash account..dr

To

bad debts recovered