Railway Accounts Department Examinations

Showing posts with label Bad debts. Show all posts
Showing posts with label Bad debts. Show all posts

Sunday, September 30, 2018

Differences between Bad Debts and Doubtful Debts in Book keeping

Book Keeping  - 5 marks question asked in 1983 & 2004
Differences between
Bad debts
Doubtful debts
1. There is no possibility that a money will be collected from the Debtors.
1. There is a possibility that the money will be collect from Debtors.
2. Bad debt has a direct relation with the doubtful debt because when the possibility to collect money ends, a bad debt occurs.
2. Doubtful debt doesn’t depend on the bad debt.
3. A bad debt is written off and it is accounted as an expense in the Profit and Loss account duly deduct from Sundry Debtors in the Balance Sheet or adjust in the Provision for Bad and Doubtful Debts.
3. As a precaution, Company creats a Provision/ Reserve (certain percentage of Total debtors value) by debited to Profit and Loss Account and deduct the Same from Sundry Debtors.  Here it is not an expense, but as a Reserve.