Increase provision for bad debts what is double entry?

Increasing the provision for bad debts requires a double-entry bookkeeping system. This means two accounts are affected by the transaction to maintain the balance of the accounting equation (Assets = Liabilities + Equity).

The double entry is:

* Debit: Bad Debt Expense (Income Statement Account) - This increases the expense, reducing net income.

* Credit: Allowance for Doubtful Accounts (Balance Sheet Account) - This increases the contra-asset account, reducing the net realizable value of accounts receivable.

In simpler terms: You're recognizing the anticipated loss from uncollectible debts (expense), and simultaneously setting aside money to cover that loss (reducing the value of your receivables). The net effect is a reduction in your company's profit and a reduction in the reported value of your accounts receivable on the balance sheet.