Sunday, November 4, 2012

Provision for Doubtful Debt

We received queries from among our weblog readers in relation to provision for doubtful debt. We are going to sum up her queries as beneath:

a. Which IAS typical govern this location
Provision for Doubtful Debt
b. Is common provision for doubtful debts nevertheless allowable? If a client delivers an allowance of 70k per year as doubtful debt exactly where the double entry is Debit: Bad debts Credit: Provision for doubtful debts - is this practice nevertheless allowable?

Response from
a. No. Common provision is no longer permitted. IAS 39 states provision for doubtful debt is expected when there is objective evidence that the receivable quantity is no longer recoverable. As such, only distinct provision is permitted. For accounting entries, it can be Dr. Bad Debts Expense, Cr. Provision for Doubtful Debt

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