Does the provision for doubtful debts go into the sales control account?

by James
(New Zealand)

Q: Does the provision for doubtful debts go into the sales control account? Thank you very much!


A: 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.

Comments for Does the provision for doubtful debts go into the sales control account?

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Provision for doubtful debts
by: Sam Sam

Provisions are made to cover the debts customers owe an organization. However provision for doubtful debt is not recorded in the Debtors / Sales Ledger / Payment Receivable Control Account because customers are yet to make payments and the organization does not know if their customers will pay all the amount owed. It is only recorded as bad debt when the customer does not pay and the organization decides to write off the amount.
Sales control account
by: Anonymous

There exists two control accounts namely sales control account/debtors control account/accounts receivables control account and the purchases control account also know as creditors control account/accounts payable control account.
provision for doubtful debts
by: sithmi

However provision for doubtful debts is not entered into the sales ledger control account. Even I need to know the reason for that.
Clarity
by: Anonymous

I'm not quite sure with the existence of the sales control account, but what I do know is that there is a Debtors control account. Maybe you meant it to be Credit Sales Control Account?

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