Multiple choice

To make provision for bad debts, which of the following journal entries is correct?

  1. Debit the profit and loss, and credit the bad debt account

  2. Debit the profit and loss account, and credit provision on bad debt account

  3. Debit the provision account and credit the bad debt account

  4. Debit the provision and credit the account of individual customer
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B Correct answer
Explanation

The provision for doubtful debts is an account receivable contra account, so it should always have a credit balance. Hence, entry for provision for bad debts is:

Profit and Loss a/c Dr       To Provision for bad and doubtful debt

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