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Post Info TOPIC: Bad Debts
Consul


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Bad Debts
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I am trying to create a provision for bad debt account and a bad debt account. The provision being 20% of A/R and bad debt those A/R 90 days overdue.

I know that the bad debt account will affect the P&L but I am not sure how the Provision will affect the final accounts.

Further, how do i go about writing off the bad debt. and kindly state which accounts will be affected. confuse



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consul
Figurate


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Create the bad debt nominal codes first, if they aren't in your chart of accounts already.
The joural entry to create a bad debt provision:
Dr Bad Debt a/c in the P&L ac (with the amount of the bad debt provision)
Cr Bad Debt a/c in the BalSheet (with the amount as above)

The Bad Debt provision will reduce the Profit & Loss account and also create a liability in the Balance Sheet.


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Consul


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Thank you for the information.



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consul
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