Doubtful debts example sentences

Doubtful Debts are those debtors who may pay but business firm is not sure about the collection of full amount from them.In fact, as a matter of business experience, some percentage of such debtors are not likely to pay, hence treated as doubtful debts.It is created by debiting the amount of required provision to the profit and loss account and crediting it to provision for doubtful debts account.To illustrate, valuing closing stock at cost or market value whichever is lower; creating provision for doubtful debts, discount on debtors; writing of intangible assets like goodwill, patents, etc.Provision for doubtful debts is also called 'Provision for bad and doubtful debts'.Provisions for doubtful debts are made on estimates and personal judgments.To consider this possible loss on account of non-payment by some debtors, it is a common practice (and necessary also) to make a suitable provision for doubtful debts at the time of ascertaining true profit or loss.The provision for doubtful debts is usually calculated as a certain percentage of the total amount due from sundry debtors after deducting/writing-off all known bad debts.It needs to be noted that debtors should be taken before making any provision for doubtful debts.Therefore, the trader creates a Provision for Doubtful Debts to take care of expected loss at the time of realisation from debtors.