Bad Debts and Provision for Doubtful Debts

BAD DEBTS & PROVISION FOR DOUBTFUL DEBTS

*Bad debts : An operating expense from credit sales and not collecting the customers entire accounts receivable balances.

Bad debts due to -

1) Customer declares bankrupt

2) Customer passed away 

3) Customer no where to be found                            

*Bad debts Recoverable: Bad debts being written off previously has been paid by customers now .

*Provision for Doubtful Debts : Allowance for Doubtful Accounts is contra current asset account associated with accounts receivable. When the credit balance of allowance for doubtful accounts is subtracted from the debit balance in accounts receivable the result is known as the net realizable value of the accounts receivable.