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El-Hoss
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Prepared by D. El-Hoss
Accounting entries for provisions for bad debts
As the account is a provision then the entry is made directly from the credit side to the
debit side of the Profit & Loss Account.
Example
At 31st December 19X8 the debtors figure amounted to $10,000. It is estimated that 2
per cent of debts (i.e. $200) will prove to be bad debts, and it is decided to make a
provision for these. The accounts would appear as follows:
Dr
31.12.X8
Cr
$
200
200
200
Dr Trading and Profit and Loss Account for the year ended the 31.12.X8 Cr
$
$
Opening Stock
XXX
Sales
XXX
Closing Stock
XXX
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XXX
Wages
Lighting and heating
Provision for Depreciation
Rent
Bad Debts
Provision for bad debts
General expenses
Carriage inwards
Net Profit bal. c/d
XXX
XXX
XXX
XXX
90
200
XXX
XXX
XXX
XXX
XXX
Capital
XXX
XXX
XXX
XXX
The deduction of the provision for bad debts gives a more accurate figure for the
value of the current asset of debtors thereby fulfilling the accounting rule of relevance
www.igcseaccounts.com
Prepared by D. El-Hoss
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Dr Trading and Profit and Loss Account for the year ended the 31.12.X9 Cr
$
$
Opening Stock
XXX
Sales
XXX
Closing Stock
XXX
Gross Profit bal. c/d
XXX
Wages
Lighting and heating
Provision for Depreciation
Rent
Bad Debts
Provision for bad debts
General expenses
Carriage inwards
Net Profit bal. c/d
XXX
XXX
XXX
XXX
XXX
240
XXX
XXX
XXX
XXX
XXX
Capital
XXX
Gross Profit bal. b/d
XXX
XXX
XXX
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Prepared by D. El-Hoss
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XXX
Wages
Lighting and heating
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Capital
XXX
Gross Profit bal. b/d
Reduction in the
provision for bad debts
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XXX
30
XXX
XXX
Prepared by D. El-Hoss
www.igcse.accounts
www.igcseaccounts.com