In this video, you will learn the simple steps for preparing provision for doubtful debts account. For showing the correct amount of provision for doubtful debt, provision for doubtful debts account is made.
Before watching the video, you can also read previous article " Accounting Treatment of Provision for doubtful debts"
Simple Steps for making provision for doubtful debts account
1st: Show the opening balance of provision for doubtful debts account in the credit side of it.
2nd: Show total amount of bad debts (bad debts in trial balance + bad debts in outside of trial balance) in the debit side of provision for doubtful debt account
3rd: Show the closing balance of provision for doubtful debts in the debit side with new rates which is charged on sundry debtors.
4rd: If debit side is more than credit side, difference will be shown in the credit side with writing profit and loss account as balancing figure. Now total of both side of provision for doubtful debts account will match.
{ Important Notes: This balancing figure will go to the debit side of profit and loss account but if the total of credit side of provision for doubtful debs account is more than debit side total then difference will be go to the credit side of profit and loss account }
