Question

The entry for creating a provision for bad debts is ___________.

• A. debit provision for bad debts a/c and credit debtors a/c
• B. debit debtors a/c and credit provision for bad debts a/c
• C. debit provision for bad debts a/c and credit profit and loss a/c
• D. debit profit and loss a/c and credit provision for bad debts a/c

Answer 1

Answer: (D)

debit profit and loss a/c and credit provision for bad debts a/c

simple reason that out of the credit sales made during the particular year, some debts are likely to become bad in the next year due to non- payments. The correct accounting is to make provision for such likely bad debts every year

The entry for creating a provision is :

profit and loss A/C Dr.

To Provision for Doubtful debts.