- To decrease any provision for bad debts, a provision for bad debts must already exist.

This provision may have been created at the end of the first year of your business existence, or when you have implemented such accounting policy. At the end of the following year, you need to revise or calculate the provision for bad debts, or provision for doubtful debts, based on the figures of your good book debts.

This is necessary to ensure that the provisions calculated are in line with any fluctuations in your credit sales, and outstanding debts, and changes in credit control.

In any consecutive years, you need to revise the amounts of any provisions made (created / increased / decreased) in the previous year. You may need to increase or decrease the amount of the provision.

- If the amount for the provision is lower than that of the previous year; you need to decrease the provision for bad debts or doubtful debts.

You may wish to calculate the amount for the provisions on the following methods:

• Estimates or calculations based on the age analysis schedules of your debtor accounts.
• Estimates or calculations based on the total outstanding debt.
• Estimates or calculations based on the total sales on credit.
  - If you use any method to calculate the provision, you need to be consistent with the method in the consecutive years.
  
  - This is necessary to ensure that the provisions calculated are in line with any fluctuations in your credit sales and outstanding debts. This provision will have an effect on your Income Statement (Profit or Loss).

To Decrease Provision for Bad Debts:

1. Click on the Batch Entry icon, or click on the Input→Batch Entry menu option.
   - Keyboard Access: Press the F2 key on your keyboard. Alternatively, press the Alt+I+B keys on your keyboard.
   The Batch Type Selection screen will be displayed.
2. Select the General Journal.
3. Click on the Open button. The Batch Entry Transaction screen for the General Journal is displayed:
   
   
4. Enter and/or select the following:
   1. Reference number - Enter the Reference number you allocate to the Provision Bad Debt transaction.
   2. Date - Enter or select the date for the transaction.
   3. Description - Enter a brief description for the transaction.
   4. Account - Select the applicable account to which you need to allocate the debit or the credit transaction.
   5. Tax Account - Select the No Tax code.
      - You may also select to hide the Tax column, and lookup facility in the Setup Options for the General Journal, if no VAT/GST/Sales Tax is applicable to all transactions in this batch, or if you are not registered as a VAT/GST/Sales Tax Vendor.
      
      
   6. Amount - Enter the amount of the transaction.
      There are two ways in which the increase in bad debts may be recorded, i.e.:
      1. Reverse the transaction for the provision created in the previous financial year, or the balance of the provision for doubtful debts account (e.g. 1000), and enter the full amount for the new calculated provision (e.g. 900).
      2. Enter the decrease in the provision of bad debts (the calculated amount - less the amount of the previous year), e.g. 900 less recorded for the 1000 previous financial year. In this case only 100 would be entered in the journal to reduce the balance of the provision for bad debts account to 900.
5. After entering the transactions in the General Journal, the transactions will be displayed as follows:
   
   - Since no Tax is applicable to these transactions, you may select to hide the tax column, Exclusive and Inclusive icons, as well as the lookup facility in the Setup Options for the General Journal, as in this example.
   
   - It is not necessary to balance the batch, since the debit and credit transactions should be of the same amount.
   
   
6. Click on the F9: Process icon, or press the F9 key on your keyboard, to change the alias (batch name).
   - This will help you if you wish to identify a specific batch to generate a batch type report, or if you wish to export posted batches to a file.
   
   
7. Click on the F8: List icon, or press the F8 key on your keyboard, to list the batch.
   - It is a good idea to list the batch, and check the entries on the batch thoroughly. If there are any errors, you may edit the batch, before posting the batch.
   
   
8. Click on the F6: Post icon, or press the F6 key on your keyboard, to post (update) the batch to the ledger.

After posting the transactions, the T-Account View of the transactions should reflect as follows:

The amount of provision for bad debts is credited to the Provision for Bad Debts account.
This will increase the balance of the Debtors Control Account to display the good book debtors. This is a contra account to the Current Assets Financial Category.

The amount of provision for bad debts is debited to the Bad Debts expense account.
This will increase your net profit.

- Debits - Provision for Bad Debts (Contra Account for the Debtor’s Control Account) = Credits - Expenses (Bad Debts)