Bad Debts and provision for doubtful debtors

Question 1

What is a bad debt

Answer 1

A bad debt is a debt owing to a business which it considers will NEVER be paid.

Question 2

To write off a bad debt you will …

Answer 2

Debit bad debts written off account

Credit Debtor’s account

Question 3

What is provision for doubtful debtors

Answer 3

Provision for doubtful debts (bad debts) is the estimate by a business of the likely percentage of its debtors which may go bad during any one accounting period

Question 4

To create a provision for doubtful debts you must …

Answer 4

Debit Profit and Loss Account

Credit Provision for doubtful Debts

Question 5

If its an increase in provision for doubtful debts

Answer 5

Debit Profit and Loss account with the amount of the increase

Credit Provision for doubtful debts account with the amount of the increase

Question 6

If its an decrease in provision for doubtful debts

Answer 6

Debt Provision for doubtful debts with amount of decrease

Credit Profit and Loss Account with the amount of the decrease

Question 7

Trade Debtors have what balances

Answer 7

DEBIT

Question 8

Bad Debts have what balances

Answer 8

DEBIT

Question 9

Provision for doubtful debts have what balances

Answer 9

DEBIT