The entry for creating a Provision for bad debts is_____________?
Correct answer: B. Debit Profit and Loss A/c and credit Provision for Bad Debts A/c.Credit & Lending
- A. Debit Provision for Bad Debts A/c and credit Debtors A/c
- B. Debit Profit and Loss A/c and credit Provision for Bad Debts A/c.Credit & Lending
- C. Debit Provision for Bad Debts A/c and credit Profit & Loss A/c
- D. Debit Debtors A/c and credit Provision for Bad Debts A/c
Explanation
Creating a provision recognizes an expected bad-debt expense and establishes a contra-receivables balance. Therefore, Bad Debts Provision is credited while the expense is debited to the Profit and Loss Account.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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