what is the formula for provision for discount on debtors and provision on doubtful debts?
what is the formula for provision for discount on debtors and provision on doubtful debts?
As such there is no formula to calculate Provision for bad and doubtful debts. One thing that must be remembered is - Provision for bad and doubtful debts is calculated on the remaining debtors i.e. after deducting further bad debts from debtors, if any, given in the adjustment or as additional information.
Also, in case of Provision for discount on debtors, one must remember that discount is not allowed on debts that become bad (the amount that becomes irrecoverable from the debtors is known bad debts). Therefore, Provision for discount on debtors is made for good debts only. In other words, Provision for discount on debtors is calculated on Sundry Debtors after deducting bad debts and the provision for doubtful debts.
As such there is no formula to calculate Provision for bad and doubtful debts. One thing that must be remembered is - Provision for bad and doubtful debts is calculated on the remaining debtors i.e. after deducting further bad debts from debtors, if any, given in the adjustment or as additional information.
Also, in case of Provision for discount on debtors, one must remember that discount is not allowed on debts that become bad (the amount that becomes irrecoverable from the debtors is known bad debts). Therefore, Provision for discount on debtors is made for good debts only. In other words, Provision for discount on debtors is calculated on Sundry Debtors after deducting bad debts and the provision for doubtful debts.
