CBSE Class 11-commerce Answered
Explain provision for doubtful debts and provison for discount on debtors.
Asked by shiphalijain | 13 Mar, 2018, 08:18: AM
Expert Answer
Provision for doubtful debts:
A firm makes provision at the end of the accounting year for bad debts which may occur in the subsequent year. This is because a part of debt may become irrrecoverable from debtors in the sunsequent year. So it is necessary to create provision for such possible debts every year. In this case, debit to the profit and losss account will reduce the profit for the current year by the amount of provision.
Provision for discount on debtors:
Debtors outstanding at the end of the year make payment in the subsequent year and cash discount may be allowed to them if they make prompt payment by due date. This is because the debt incurred during the year and the discount should be accounted as expense for the year.
Answered by Tharageswari S | 13 Mar, 2018, 09:02: AM
