Bad debt provision

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Bad debt provision

Postby Mdam » Wed Feb 20, 2013 8:17 am

Client has £300 on a customer ledger on sage. Last year we dr bad debts C&T bad debt provision but still on client ledger. What do we so with it the year on the bad det schedule? Bad debt provision b fwd includes it as does debtors per sage, so should we leave it assuming it hasn't been paid?
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Re: Bad debt provision

Postby publicfinance » Wed Mar 13, 2013 12:54 pm

Hi

From your question, if I am reading it correctly, you made a provision in the previous years accounts for £300 but left the debt on the sales ledger so in effect on the balance sheet the debt was zero (i.e. £300 on sales ledger and a credit in the bad debt provision for £300).

In the current year if the debt is still outstanding on the sales ledger then you need to make a decision. If the debt is wholly or partly recoverable then it should be pursued and until such time as recovered left on the sales ledger.

If is deemed unrecoverable then write it off from the sales ledger but also release the bad debt provision so that the effect in the P&L is zero.

Hope this helps

PF :)
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Re: Bad debt provision

Postby victoredwards » Fri Mar 14, 2014 5:14 am

The provision for bad debts refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for Doubtful Accounts, or Allowance for Uncollectible Accounts. Provision for Bad Debts is the income statement account also known as Uncollectible Account Expense or Bad Debt Expense. In this situation, the Provision for Bad Debts reports the credit losses that pertain to the period shown on the income statement.
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