Does the provision for doubtful debts go into the sales control account?
Q: Does the provision for doubtful debts go into the sales control account? Thank you very much!
The provision for doubtful debts does not go into the sales control account.
In fact, I wasn't even aware a sales control account is general practice in accounting. Is it? James, if you can, please explain a bit more about what the sales control account is and how it works. Anyone else have any more information about the sales control account?
Remember that the provision for doubtful debts is an estimate of the debts owed to your business (from debtors/receivables/customers) that will not
be paid in the future.
So you could estimate 10% of your debtors/receivables won't be received in future. Or 5%. Or 20%. Whatever your business feels is accurate.
So let's say you have debtors to the value of $100,000. You estimate, based on experience, that 10% won't pay up. So your provision for doubtful debts should be $10,000. Your debtors (gross figure) is $100,000, your provision is $10,000, and your final debtors figure will be $90,000. $90,000 represents what you really expect to be paid in future by the guys who owe you (debtors).
The provision is set off against the gross amount of your debtors to give a realistic figure of what you really expect to be paid by debtors in the future.