AccountancyCBSE Class 11 · Financial Statements - II

Bad Debts, Provision for Doubtful Debts and Provision for Discount Class 11

Updated 17 October 2026 · Fact-checked

Bad debts are debts that cannot be recovered and are a loss charged to profit. Provision for doubtful debts is an estimate of future bad debts, created on debtors remaining after writing off further bad debts; provision for discount on debtors is created on good debtors for the discount expected to be allowed. Only the change in each provision (new minus old) is charged to the Profit and Loss Account.

Work in order: bad debts first, then doubtful provision, then discount provision, each on what is left; P&L bears only new minus old.

Illustration drawn for QuestionBuddy.

Understand Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors

Bad debts. Written off to the P&L as a loss. Bad debts already in the trial balance are debited to P&L; further bad debts (given in adjustments) are charged to P&L and deducted from debtors in the balance sheet.

Provision for doubtful debts. Calculated on debtors *after* deducting further bad debts: Provision = Debtors (after further bad debts) × Rate %. It is a charge against profit. The ledger carries an old provision from last year.

New provision more than old: charge the difference (increase) to P&L.
New provision less than old: the difference is a gain, credited to P&L (write-back).
Total debit to P&L = Bad debts (total) + New provision − Old provision.

Provision for discount on debtors. Created on the good debtors, i.e. debtors after deducting further bad debts and the provision for doubtful debts: Provision for discount = (Debtors − Further bad debts − Provision for doubtful debts) × Rate %. The change (new − old) is charged to P&L.

Bad debts recovered. A debt written off earlier and now recovered is an income: Bank Dr; To Bad Debts Recovered. It is credited in the P&L.

Balance sheet presentation. Debtors less further bad debts, less provision for doubtful debts, less provision for discount = net debtors.

Order of calculation. (1) Further bad debts; (2) provision for doubtful debts; (3) provision for discount, each on the figure left by the previous step.

Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors: key facts

Provision for doubtful debts: Debtors minus further bad debts, multiplied by the rate; On the figure left after bad debts.
Provision for discount: Debtors minus further bad debts minus provision for doubtful debts, multiplied by the rate; On good debtors only.
Charge to P&L: Bad debts + New provision for doubtful debts − Old provision | + New provision for discount − Old provision for discount; A negative change is a gain.
Balance sheet: Debtors − Further bad debts − Provision for doubtful debts − Provision for discount; Net debtors.

How to answer Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors questions

These problems are sequence problems: do the steps in order and keep a running figure of debtors.

1Start with debtors in the trial balance; deduct further bad debts.
2Compute the new provision for doubtful debts; compare with the old provision.
3Deduct the new provision; compute the provision for discount; compare with the old one.
4Prepare the P&L debit as bad debts plus changes in provisions; add bad debts recovered on the credit side.
5Show debtors in the balance sheet at the net figure.

Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Provision on debtors

Suppose a distributor has debtors of ₹98,000 after writing off ₹2,000 as a further bad debt, and expects 5% of them to be bad.

How much provision is needed?

Try it first, then show the solutionSolution

Provision = 5% of 98,000 = ₹4,900.
If last year's provision was ₹4,000, the extra charge is ₹900.

Answer: Provision ₹4,900; charge to P&L ₹900.

Memory hook: Estimate, then charge the change.

Tricks to remember Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors

Short memory aids. Say each one aloud once, then use it on a question the same day.

Bad first, doubtful next, discount last
Each step starts from the figure left by the one before.
Use it when: Order of calculation.
New minus old
Only the change in a provision reaches the P&L.
Use it when: Charge to P&L.

Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: On which amount? · 1 mark · MCQBoard level

Provision for doubtful debts is calculated on:
(a) total sales
(b) debtors after deducting further bad debts
(c) creditors
(d) debtors before any deduction

Try it first, then show the solutionSolution

Written-off debts are no longer doubtful.

Answer: (b) debtors after deducting further bad debts

Example 2: Entries · 3 marks · Short answerBoard level

Give the journal entries for: (i) bad debts of ₹2,000 to be written off; (ii) creating a provision for doubtful debts of ₹4,900; (iii) transferring bad debts and the provision to the P&L. (3 marks)

Try it first, then show the solutionSolution

(i) Bad Debts A/c Dr 2,000; To Debtors 2,000.
(ii) Profit and Loss A/c Dr 4,900; To Provision for Doubtful Debts 4,900 (where there is an old provision, only the difference is transferred).
(iii) Profit and Loss A/c Dr 2,000; To Bad Debts A/c 2,000.

Answer: (i) Bad debts Dr/Debtors Cr (ii) P&L Dr/Provision Cr (iii) P&L Dr/Bad debts Cr

Example 3: All three together · 6 marks · Long answerHarder board level

Debtors in the trial balance ₹1,00,000; bad debts already written off ₹3,000; further bad debts ₹2,000; provision for doubtful debts is to be 5% on debtors (old provision ₹4,000); provision for discount on debtors 2% (old provision ₹1,500). Find the total charge to P&L and the figure of debtors in the balance sheet. (6 marks)

Try it first, then show the solutionSolution

Debtors after further bad debts = 1,00,000 − 2,000 = 98,000.
Provision for doubtful debts = 5% of 98,000 = 4,900. Charge: 3,000 + 2,000 + (4,900 − 4,000) = ₹5,900.
Good debtors = 98,000 − 4,900 = 93,100. Provision for discount = 2% of 93,100 = 1,862. Charge = 1,862 − 1,500 = ₹362.
Total charge to P&L = 5,900 + 362 = ₹6,262.
Balance sheet debtors = 98,000 − 4,900 − 1,862 = ₹91,238.

Answer: Total charge ₹6,262; net debtors ₹91,238.

Example 4: A bigger set with a recovery · 6 marks · Long answerHarder board level

Debtors ₹2,00,000; bad debts in trial balance ₹3,000; bad debts recovered ₹1,000 (credit balance in the trial balance); further bad debts ₹5,000; provision for doubtful debts 4% (old provision ₹6,000); provision for discount 2% (old provision ₹2,000). Find the net debit to the P&L for these items. (6 marks)

Try it first, then show the solutionSolution

Debtors after further bad debts = 1,95,000.
Bad debts total = 3,000 + 5,000 = 8,000; less recovered 1,000 = 7,000.
Provision = 4% of 1,95,000 = 7,800; charge = 7,800 − 6,000 = 1,800.
Provision for discount = 2% of (1,95,000 − 7,800) = 2% of 1,87,200 = 3,744; charge = 3,744 − 2,000 = 1,744.
Net debit = 7,000 + 1,800 + 1,744 = ₹10,544.

Answer: Net debit ₹10,544.

Example 5: Write-back · 4 marks · Short answerHOTS / competency

The old provision for doubtful debts is ₹6,000. Debtors are ₹90,000, further bad debts ₹2,000, and the new provision is 5%. Find the charge to P&L and explain what a negative difference means. (4 marks)

Try it first, then show the solutionSolution

New provision = 5% of 88,000 = ₹4,400.
Difference = 4,400 − 6,000 = −1,600: a decrease of ₹1,600.
Total charge for bad debts and provision = 2,000 − 1,600 = ₹400.
A decrease means the old provision was more than needed; the excess of ₹1,600 is credited to P&L (reduces the charge).

Answer: Charge ₹400; ₹1,600 excess provision is written back.

Where students lose marks in Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors

The slips examiners see most often, and what to write instead.

Mistake: Calculating provision on gross debtors
Ignoring further bad debts.
Wrong working
5% of 1,00,000 = 5,000.
Right working
5% of 98,000 = 4,900.
Do this: Deduct further bad debts first.
Usually costs: 1 mark
Mistake: Charging the whole new provision
Ignoring the old provision.
Wrong working
P&L Dr 4,900.
Right working
P&L Dr 900 (4,900 − 4,000).
Do this: Charge only the change.
Usually costs: 1 mark
Mistake: Provision for discount on all debtors
Not removing the doubtful debts.
Wrong working
2% of 98,000 = 1,960.
Right working
2% of 93,100 = 1,862.
Do this: Discount is allowed only on good debts.
Usually costs: 1 mark

Exam tips

Write each step in a column: debtors, bad debts, provision, discount.
State "new minus old" for each provision.
Show the net debtors in the balance sheet.
Add bad debts recovered on the credit side of the P&L.

Practice questions on Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Bad debts recovered are:
(a) a loss
(b) an income credited to P&L
(c) a liability
(d) added to debtors
Hint
Written off, then received.
Answer
(b) an income credited to P&L
Q2 · 3 marks · Short answerHarder board level
Debtors ₹80,000 include bad debts of ₹4,000 to be written off. Provision for doubtful debts is 5% (old provision ₹2,500). Find the total charge to P&L for bad debts and provision. (3 marks)
Hint
Provision on 76,000.
Answer
Provision = 5% of 76,000 = 3,800; change = 3,800 − 2,500 = 1,300. Total charge = 4,000 + 1,300 = ₹5,300.
Q3 · 3 marks · Short answerHarder board level
Debtors ₹90,000; further bad debts ₹2,000; provision for doubtful debts 5% (old ₹6,000). Find the P&L effect of provision and say whether it is a charge or a gain. (3 marks)
Hint
Compare new with old.
Answer
New provision = 5% of 88,000 = 4,400. Old 6,000. Difference = 1,600, a gain (reduction) credited to P&L.
Q4 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Provision for discount on debtors is calculated after deducting the provision for doubtful debts.
Reason (R): Discount can be allowed only on debtors who are expected to pay.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Good debts only.
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q5 · 5 marks · Short answerHOTS / competency
Debtors in the books are ₹1,20,000, including ₹4,000 to be written off as bad. Provision for doubtful debts is 5% and provision for discount 2%, both on the proper figure. Find both provisions and show debtors in the balance sheet. (5 marks)
Hint
Chain: 1,16,000 then 1,10,200.
Answer
Debtors after bad debts = 1,16,000. Provision for doubtful debts = 5,800. Good debtors = 1,10,200. Provision for discount = 2% of 1,10,200 = 2,204. Balance sheet: debtors 1,20,000 − 4,000 (bad debts) − 5,800 − 2,204 = ₹1,07,996.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Provision for doubtful debts is on which amount?Show answer
Debtors after further bad debts.
2.Provision for discount is on which amount?Show answer
Good debtors after the provision.
3.What is charged to the P&L each year?Show answer
The change in the provision (new minus old).
4.Bad debts recovered?Show answer
An income.
5.Are further bad debts in the trial balance?Show answer
No; they are in the adjustments.

Bad Debts, Provision for Doubtful Debts and Provision for Discount on Debtors: frequently asked questions

What is the difference between bad debts and provision for doubtful debts?

Bad debts are actual losses; a provision is an estimate of future losses.

Is provision for discount a liability?

No; it is deducted from debtors in the balance sheet.

What if the new provision is less?

The difference is a gain credited to P&L.