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Differences between a bad debt and a provision

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Question - A clothing wholesaler is experiencing cash flow problems for several years due to its accounts receivables. Some of the amounts due by debtors are irrecoverable and the company is contemplating creating a provision for doubtful debts.

(a) How is a provision for doubtful debts created and maintained? Explain, with figures if necessary?

(b) Discuss the concept or convention on which a provision for doubtful debts is based.

(c) Explain the differences between a bad debt and a provision for doubtful debts.

Reference no: EM132613665

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