Provision for doubtful debt

[Nobin]

Step Process Action Accounting entry
1 Identify bad debts Write-off P&L account Dr
Debtors account Cr
2 Forecast potential bad debts Make a provision P&L account Dr
(currently doubtful) Prov for doubtful debts a/c Cr
(with the increase or decrease on the previous year's provision)
3 Estimate cash discount to be availed of by debtors Make a provision P&L account Dr
(for prompt payment) Prov for discount account