Unit 5 help please - Provision for doubtful debts

schnappsgirl

I am a bit confused with the provision for doubtful debts. Sorry for the silly question, but I would be really grateful for any advice.

At the end of the year, someone has made sales on credit of say £80k and they received £70k from these credit customers during the year. The owner then assessed his debtors and decided to make a general doubtful debt provision of 2% of his debtors. Would you say that the 2% is the 2% of the £80k or 2% of the £10k which is remaining on the debtors account?

Thanks

sarahwilson

I think its the total sales, but now you've asked I'm not sure!!!

Toffeemadblue

It is from the debtor total at the end of the year, the outstanding balance on the SLCA, which in the example quoted would be £10,000 i.e. £200

schnappsgirl

Thank you :-)

sarahwilson

God I'm rubbish!! I must re read unit 5 this weekend!!

Bluewednesday

Don't worry Sarah, you've probably never made a general provision since Unit 5, I know I haven't and I took unit 5 7 years ago.

Toffeemadblue

Same here, does anyone in the real world actually use them ?

sdv

Toffeemadblue wrote: »

Same here, does anyone in the real world actually use them ?

Go and work for a firm of chartered accountants, or even a bookkeeping service provider or someone who is providing services to help self employed fill in thie tax returs, and it will soon come apparent whether it is being used in real world or not?

Bluewednesday

I work in practice - does that not count?

As I said I've used specific provisions but not general ones

GreenMousey

We use them and I work in the accounts office of a manufacturing company, we use both specific and general ones, the auditors recommend it.