Example 1
Suppose I make a Sale of 50000 to A
A paid me only 30000 and settled his account
In this case,20000 is Bad Debts
I will get this deduction of Bad Debts in PGBP
Example 2
Suppose I make a Sale of 50000 to A
A is expected to pay me only 30000
Hence,20000 is my expected loss for which I make Provision for Bad Debts
I will not get deduction for this provision for bad debts
Example 3
Suppose I make sale of 40 lacs
As per past experience,I book 5% Provision for bad debts i.e. 4000000*5%=200000
In this case,no deduction will be available for this 200000
Example 4
Suppose Bank make sale of 40 lacs
Bank books 5% Provision for bad debts i.e. 4000000*5%=200000
In this case, bank deduction will be available for this 200000
Written on Sept. 19, 2016, 11:16 p.m.