ACT 110 Is EASY POP!

1. Our Confession ACT 110 Is EASY POP! Because, Finals is Easy!

2. Lecture Notes 9 Financial Statements & Provision for Bad Debts

3. Provision for Bad Debts Definition • A provision is any amount: • retained as reasonably necessary • for the purpose of providing for any liability or loss • which is either likely to be incurred, • or certain to be incurred • but uncertain as to amount or as to the date on which it will arise.

4. Provision for Bad debt What is it? • An account showing the expected amounts of debtors at the balance sheet who might not be able to pay their accounts. Where to find it? • Provision for bad debt is usually found in the: • Trial Balance • Notes to the trial balance

5. Provision for Bad debt How to treat it? • Provision for bad debts found in the trial balance should be deducted from Debtors in Balance Sheet. NOTES to Trial Balance • The treatment of provision for bad debts in the financial statements would depend on the instructions of the notes. • Create Provision for bad debts $100 • Record as an Expense in Profit and Loss A/c $100 • Deduct $100 from Debtors in Balance Sheet

6. Provision for Bad debt NOTES to Trial Balance • The treatment of provision for bad debts in the financial statements would depend on the instructions of the notes. • Increase Provision for bad debt by $50. • This means that there is a provision for bad debt in the trial balance already. E.g. $100 • Record an increase in Provision for bad debt as an Expensein Profit and Loss A/c $50 • Deduct $150 from Debtors in Balance Sheet

7. Provision for Bad debt NOTES to Trial Balance • The treatment of provision for bad debts in the financial statements would depend on the instructions of the notes. • Increase Provision for bad debt to $200. • This means that there is a provision for bad debt in the trial balance already. E.g. $100 • Record an increase in Provision for bad debt as an Expensein Profit and Loss A/c $100 • Deduct $200 from Debtors in Balance Sheet

8. Provision for Bad debt NOTES to Trial Balance • The treatment of provision for bad debts in the financial statements would depend on the instructions of the notes. • Decrease Provision for bad debt by $50. • This means that there is a provision for bad debt in the trial balance already. E.g. $100 • Record a decrease in Provision for bad debt as an income in Profit and Loss A/c $50 • Added to Gross Profit in Vertical Format • Deduct $50 from Debtors in Balance Sheet

9. Provision for Bad debt NOTES to Trial Balance • The treatment of provision for bad debts in the financial statements would depend on the instructions of the notes. • Decrease Provision for bad debt to $100. • This means that there is a provision for bad debt in the trial balance already. E.g. $150 • Record an decrease in Provision for bad debt as an income in Profit and Loss A/c $50 • Added to Gross Profit in Vertical Format • Deduct $100 from Debtors in Balance Sheet