06-01-2010, 04:19 PM
Enteries in the Books of Accounts
When the provision is made, the income statement/ profit and loss account is debited and the provision appears in the balance sheet on liabilities side under the head of current liabilities and provisions. Or it is deducted from the debtors on the asset side. When all efforts of recovering the debts have failed and reasonable time period has passed, the debt is then considered irrecoverable. When a bad debt actually occurs, that is known as bad debt expense, an adjustment entry is made. In income statement, the provision is reduced to the extent of bad debt expenses and corresponding entries are made in the balance sheet. It is important to note here that the effects in P/L account and balance sheet will only be correctly made if the journal entries are correct. In case of actual default the provision account is debited and debtors account is credited. The effect of adjustment entry is shown in both the statements- P/L account and balance sheet, as explained earlier.
When the provision is made, the income statement/ profit and loss account is debited and the provision appears in the balance sheet on liabilities side under the head of current liabilities and provisions. Or it is deducted from the debtors on the asset side. When all efforts of recovering the debts have failed and reasonable time period has passed, the debt is then considered irrecoverable. When a bad debt actually occurs, that is known as bad debt expense, an adjustment entry is made. In income statement, the provision is reduced to the extent of bad debt expenses and corresponding entries are made in the balance sheet. It is important to note here that the effects in P/L account and balance sheet will only be correctly made if the journal entries are correct. In case of actual default the provision account is debited and debtors account is credited. The effect of adjustment entry is shown in both the statements- P/L account and balance sheet, as explained earlier.
