Question

Amount of following is debited to profit & loss account.

• A. Old bad debts
• B. New bad debts
• C. New Reserves on doubtful debts
• D. All of the above

Answer 1

The correct option is D All of the above

Bad debts and provision for bad debts are loss for the business and this should be debited to the profit & loss account.

Old bad debts are those which are already recognized during the financial year before the end of the year.

New bad debts are those which are noticed after the balance sheet date but before the finalizing the financial accounts.

New R.D.D. is the reserve for doubtful debts which is created on the amount of debtors based on historical pattern.

All above are actual losses or anticipated losses and should be debited to profit & loss account of the business to arrive the true profitability.