What is credit provision for bad debts? And how should it be treated? Should we subtract provision for bad debts from credit provision for bad debts , it is mentioned in the first line of the below attached photo
Credit provision for bad debts is the credit balance in the provision for bad debts account. Deduct it from Debtors balance and show debtors net.
Is there any journal entry for it so I can understand more clearly
Balance in PBD should be reduced from Debtors in the Balance sheet Creating Provision (P&L Dr. To PBD) Bad Debt written off (Bad Debt expense A./c Dr. To Debtor A/c) Amount transferred from PBD (PBD A/c Dr. To P&L A/c) Balance in PBD will be reduced from Debtors in the balance sheet
Will credit PBD appear in credit side of P&L
PBD is a provision. It is reduced from Debtors in Balance sheet. If PBD balance is more than required then the excess is credited to P&L.