Do we take provision for bad debts/doubtful debts in profit and loss account?
In the current year Sundry Debtors balance, if there are doubtful debts, Provision for Bad debts/Doubtful debts is to be created by debiting Profit & Loss Account. The balance in Provision for doubtful debts account should be shown in Balance sheet as a deduction from Sundry debtors. If provision is already existing, and if it is considered sufficient to cover the doubtful debts required for the current year, no debit need be made to Profit & Loss Account. Whatever balance that appears in the Provision for doubtful debts account should be shown as a deduction from Sundry debtors in Balance sheet. Accountancyhelp.
Yes of course, provision for bad and doubtful debt is must in profit & loss account. Without taking provision for bad & doubtful to debit of profit & loss you cannot calculate exact profit or loss for the relevent year, and your financial report will not be “true & fair” as required by income tax laws of different countries. further if you fail to provide for bad & doubtful debt your profit for the relevent year will be overstated and you may end up paying high income tax computed on the basis of such overstated profits.
