Provision Journal Entry

Provision Journal Entry

In this article we would explain the Provision Journal entry. The provision is a kind of liability, which can be reasonably estimated. Thus a liability is created by debiting the expenses and crediting the liability.

Date	Particulars	Dr.	Cr.
	Bad Debt	$ xxx
	Provisions for Bad Debt		$ xxx

Provision Settlement Journal Entry

Provision is settled by debiting the provision and crediting the cash/other asset as case may be. Creation of provision and settlement of provision has been explained with an example below

Date	Particulars	Dr.	Cr.
	Provisions for Bad Debt	$ xxx
	Debtors/Cash		$ xxx

Provision Journal Entry Example

Bad debt provision is created amounting $2000 for next year. The actual bad debts for next year were also $ 2000.

This Year Entry

In the current year provision is created by debiting the expense and crediting the provision for that expense.

Date	Particulars	Dr.	Cr.
	Bad Debt	$ 2000
	Provisions for Bad Debt		$ 2000

Next Year Journal Entry

In next year, when actual expense was confirmed, then the provision was removed by debiting the provision and crediting the relevant head (in this case debtor).

Date	Particulars	Dr.	Cr.
	Provision for Bad Debts	$ 2000
	Debtors		$ 2000