Provision for doubtful debts in the Financial Statements
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Provision for doubtful debts in the Financial Statements
In terms of the income statement creating the provision for doubtful debts for the first year or first time is treated or shown as an expense. In the years after only the changes in the provision is recorded. For example an increase in the provision is shown as an expense while on the other hand a decrease in the provision is shown as revenue. For the statement of financial position the total provision is subtracted from the trade receivables amount. For example a total provision of £500 is taken away from £8,240 which equals to £7,740 which is the amount that the business expects to actually receive.
