Help with Provision for Bad Debts

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
I am struggling on completing a trial balance as i think my provision for bad debt is on the wrong side. I know i am being thick but the book i have is stupid. Please help

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help with Provision for Bad Debts

    Provision for bad debts is a credit balance in the balance sheet. I always remember it because it's opposite the bad debts expense account which is a debit.<BR><BR>Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help with Provision for Bad Debts

    Thanks Annette<BR><BR>When you have an adjustment to make and it is 2% of the debtors. Do you minus the 2% off the debtors, but for the opposite side i am not sure because i cant debit the provision for bad debt or do i put it in bad debts. <BR><BR>I also have an adjustment for £330 bad debt written off, do i debit the bad debt account and credit the provision for bad debts.<BR><BR><BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help with Provision for Bad Debts

    The secreat to Bad debts is not to get the 2 mixed up...<BR>There is BAD DEBTS and PROVISION for BAD (doubtful) DEBTS<BR><BR>First of all.. Deal with the bad debts - bad debts are to be written off, taken completely from the sales ledger accounts.<BR>So .. Debit BAD DEBTS £330 and Credit DEBTORS £330 (Credit Customer account in S/Ledger)<BR><BR>Then completely seprate to BAD DEBTS is the Provison for bad debts (i think most exams call this DOUBTFUL debts)<BR><BR>This is the question where as a percentage is used ie 2%<BR>So now take your debtors figure and take off the £330 bad debts and it will give you a new Debtors figure - now do 2%<BR><BR>Then you Credit PROVISON for Doubtful debts(bal sheet) with the 2% figure<BR>and Debit Provision for doubtful debts adjustment account (P&L sheet).<BR><BR><BR>Does this make sense or not - let me know!<BR><BR>Amanda<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help with Provision for Bad Debts

    Hi.<BR><BR>You seem to have missed out the Control account entry!<BR><BR>Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help with Provision for Bad Debts

    DEBTORS is the control account - then the words (Credit Customer account in S/Ledger) are in brackets to say .. Dont forget to do the Sub ledger too!!!!<BR><BR>Amanda<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Help with Provision for Bad Debts

    Thanks for that, that helped a great deal and now i can complete it.<BR><BR>Many thanks<BR><BR>Kelly

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