Provision for doubtful debts

Question 1

What is provision for doubtful debts?

Answer 1

An estimate of the likely amount of trade receivables that may become irrecoverable

Question 2

What is the double entry when making the provision for the first time?

Answer 2

Debit ‘doubtful debts’ (expense on income statement)

Credit ‘provision for doubtful debts’ (subtracted from trade receivables on sofp)

Question 3

What is the double entry for an increase in the provision?

Answer 3

Debit ‘increase in doubtful debts’ (expense on income statement
Credit ‘Provision for doubtful debts’ (increases amount subtracted from trade receivables on sofp)

Question 4

What is the double entry for a decrease in the provision?

Answer 4

Debit ‘provision for doubtful debts’

Credit ‘increase in doubtful debts’