What type of account is a provision for doubtful debts?

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Solution

Provision for doubtful debts is an accounts receivable contra account.

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What are provisions? How are they created? Give accounting treatment in case of provision for doubtful Debts.

Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on March 31, 2017

	Rs
Debtors	80,000
Bad debts	2,000
Provision for doubtful debts	5,000

Adjustments:

Bad Debts Rs 500 Provision on Debtors @ 3%.

Which account is credited while creating a provision for doubtful debts in the books?

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