Account 問題

Bad debts --> u can't get the yr money back from yr debtors. Bad debts would be recognized when it incurrs. say, u know that debtor A is bankruptcy then u write off the amount owed by debtor A in the period that u know the fact that A is bankruptcy.

Entry: Dr Bad debts Cr Debtor A

Provision for doubtful debts:
You might think that some debtors may not be able to repay the loan to u. So you do the provision for them. And there is no cash outflow from the entity. (quite similar to the nature the provision for depreciation.)

Entry: Dr P&L -- provision for bad debts Cr. Prvision for bad debts (a balance sheet items)

The basis can be either:
1) % of the outstanding balance of debtors
2) % of the credit sales during the year.

2006-12-23 04:43:52 補充：
btw, what the above person mentioned abt the provision for bad debts is somthing about HK taxation.

2006-12-23 04:44:12 補充：
Reference:Me

Bad debt mean an amount owed by a debtor which is unlikely to be paid, such as liquidation of debtor's company. The full amount should be written off to the P/L account of the period or to a provision for bad and doubtful debts as soon as it is foreseen, on the gorunds of prudence.

Provision for bad debts mean a provision calculated to cover the debts during an accounting period that are not expected to be paid. A general provision, e.g. 50% of debtors, is not allowed as a deduction for tax purposes. A specific provision, in which specific debts are identified, is allowed if there is documentary evidence to indicate that these debts are unlikely to be paid.

bad debts係而家已經知道人地係冇得還架啦
而provision for doubtful debts係預計會有bad debts出現
因此就先開定個account
儲定一舊錢架姐

同埋
bad debts係知道邊個既
好似如果陳先生沒錢俾
就會bad debts左陳先生欠既錢
但provision for doubtful debts係冇呢樣野
唔知邊個既
每個月只會入一個%
例如每個月入profit既5%入provision for doubtful debts