by
Adnan Mustafa , Credit Controller , National Refreshment Company LLC
The provision created to cover the next year’s bad debt expense out of the current year’s debtors
is known as provision for bad debts. This provision is created on the debtors after deducting the
current year’s bad debt.
The provision for bad debt is calculated on the debtors’ balance obtained after deducting the bad debt written off.
In the balance sheet, always the new provision for bad debt is deducted from the Debtors.
provision for bad debt,s is recognized according to the IAS 37 provision for bad debt,s which mean that there is some probability that the customer will n,t be able to pay debt,s..................
in according to IAs 37 provision is a liability of uncertain time and amount...................
by
Khaja Moinuddin , Group Assistant Financial Controller , Confidential
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.
Example:
Gross accounts receivable $100,000
Less: Allowance for bad debts (uncollectible) $5,000 (based on %)
Net receivables $95,000
Based on ageing of months to year the outstanding or receivable of amount on % percentage of provision for bad debts is provided in financial or fiscal year.
Provision for bad or Doubtful debts are the estimate or %tage of amount which every coy. in a financial year set aside for the receivable's after writing off the acutal irrecoverable debts. As the provision is for doubtful it may or may not be possible to have bad debts.
by
Khurram Shahzad , Site Commercial/Accounts Officer , Siemens Saudi Arabia
The provision created to cover the next year’s bad debt expense out of the current year’s debtors
is known as provision for bad debts. This provision is created on the debtors after deducting the
current year’s bad deb.