Debtors Control Account &
Provision for Doubtful Debts

by David Wong
(Miri, Sarawak, Malaysia)

Q: Is the increase in the provision for doubtful debts included in the debtors control account?

A: Thanks for your question David.

I am sure there are a number of people who have not come across this accounting concept before or are a bit uncertain about it. So before I answer your question let me first go over and explain exactly what the provision for doubtful debts is.

The word provision comes from the Latin word providere. Pro- means ‘forward’ and videre means ‘to see’. So a provision is looking to the future, preparations made for the future or doing something with the future in mind.

In accounting, a provision is a future loss that will definitely occur but whose timing or amount is uncertain. We make an estimate of this future loss and record it as soon as we are sure it will occur.

The provision for doubtful debts is an estimate of the amount we will not receive from debtors in the coming year. In other words, an estimate of this future loss of incoming cash.

For example, if our debtors account (showing the amount owing to us) comes to $100,000 right now, and we expect 10% of these debts to not be paid, then our provision for doubtful debts will be set at $10,000 and the true value of our debtors will be $90,000.

Alright, so now that we've cleared up what the provision for doubtful debts is, let me answer your question:
From what I understand the provision for doubtful debts is not included directly in the debtors control account. Instead we have a T-account for debtors control and a separate T-account for the provision itself.

In our balance sheet we show the true value of our debtors - i.e. the net figure. For our example above, the balance sheet would show trade and other receivables (the common official term used for debtors) as $90,000. This figure would be obtained by setting off the provision for doubtful debts (with a credit balance of $10,000) against the debtors control account (with a debit balance of $100,000).

By the way, the provision for doubtful debts is also sometimes known as the provision for bad debts.

Comments for Debtors Control Account &
Provision for Doubtful Debts

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Debtors net of provisions
by: Anonymous

I am studying branch accounts and in its format there is an entry of Debtors net of provisions on the debt side I want to know what this means?

"Net" means after deducting something. "Debtors net of provisions" means debtors minus provisions. The "provisions" they are talking about is provision for doubtful debts (also known as provision for bad debts). I go over this subject more in my accounting books.


Provision for bad debts
by: Anonymous

What happens if provision for bad debts was set at $5000 and it is now reduced by $2100 the next year? What accounts are affected here? How would one present this in an unadjusted and adjusted trial balance?

provision for bad debts
by: Anonymous

thanks so much i hv understood very well

if we write off our old provision a/c and no new provision is to be made.
by: Anonymous

I want to know the entry to be pass -
when the old provision a/c is written off and no new provision is to be mantained as the firm is feeling like no debtors (at the end of accounting year) is bad means all the money is recoverable from the amount of debtors calculated at the end of year.

Provision for Doubtful Debts
by: Anonymous

Transactions that involved in debtors or creditors.

Increase or decrease in Provision for doubtful debt
by: AS-K

Since the provision is an estimation of expected non-recoverable debts, it means that every year the initial provision made may change. This change, resulting from new level of expected non recoverable debts, will cause the initial provision amount to go up or down (ie increase or decrease).

The profit or Loss account will be affected by this change in provision. An increase in provision for doubtful debt is debited to the P&L account (income statement) to reduce profits and credited to the provision for doubtful debt account. A decrease in the provision for doubtful debt is debited to the Provision for doubtful debt account and credited to the P&L account.

by: Anonymous

P+L is profit and loss

Provisions for Doubtful Debts
by: Anonymous

Can you please tell me what is the double entry for Provisions for Bad Debt and please do not use the P+L as an account for doing so.


You're welcome
by: Anonymous

You're very welcome. Glad to hear it makes sense :)

~ Editor

Provision for Doubtful Debts
by: Anonymous

The lesson was clear and understandable. Thank you so much about it.

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