how to create account of provision of bad debts?

Answer 1

You just create GL accounts in the usual way.

Then you
Dr the P&L account for bad debts (this reduces your profit for the current period)
Cr the Balance sheet account for Provision for bad debts.

What you are doing is recognising that a portion of your debtors (customers who owe you money) will not be able to pay, and rather than taking the loss on current sales in the future, you are taking that loss now.

Answer 2

Copper is right, provision for bad debts is a balance sheet item which effectively credits debtors. If its in Sage, debtors are normally around nominal code 1100 so l would keep it close to that.

You need to consider if the debts should be written off if they are never going to be paid. No point starting a provision for a doubtful debt if you actually believe it will never be receivable. This just means you will carry the debtor and provision for years and years.

Answer 3

It's an Overheads account. Are you using Sage? It's 8102.