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What is meant by provision for doubtful debts? Why is it created? |
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Answer» Provision for bad and doubtful debts refers to amount set aside as a charge against profit to meet any loss arising due to bad debt in future. The amount of doubtful debts is calculated on the basis of some percentage on debtors at the end of the accounting period after deducting further bad debts (if any). A provision for doubtful debts is created and is charged to profit and loss account. |
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