Provision for Doubtful debts

[Greenybwa]

How do you actually calculate the provision for doubtful debts?

EG: The provision for doubtful debts is to be provided as £2000 for a specific debt, plus 2% of the remainer of debtors.

Last years provision is £1,800
Debtors = £32,000

I've been doing it like this:

Debtors - bad debts = xxx - specifc = xxx then *2% = xxx + specific = provision for doubtful debts but I think thats wrong..

Can someone help me out? Thanks alot.

 

[Fidget]

I'm reading it as the specific debt being included in the 32,000 debtors figure, in which case, you're correct and the provision for bad/doubtful debts using the above is 2,600.

Remember though that a provision already exists, so you are adjusting it to that new amount. The new amount is 2,600 and the existing amount is 1,800, so you are adjusting the provision upwards by 800.

That means that in the profit and loss account you only record the change in the provision - a debit of 800 to reflect the increase in the provision in this case.

The Debtors figure in the balance sheet will be 32,000 - 2,600 = 29,400.