Provision for bad Debt and Provision for Discount Allowed and Received

Financial Accounting SSS1 Third Term

WEEK 4

End of Year Adjustments in Profit and Loss Account

Performance Objectives

1. Provision for Bad Debt
2. Provision for Discount Allowed and Received

Content

The provision for bad debts has to do with making room in the balance sheet account for instances when a client is unable to redeem their debt. Also known as Allowance for Bad Debts, it makes provision for Bad Debts as a contra asset account (i.e., an asset account with a credit balance). It is used along with the account Accounts Receivable in order to report the net realizable value of the accounts receivable. Provision for Bad Debts might also be an income statement account also known as…