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How does relevance of the concept of prudence to bad debts and the provision for doubtful debts?

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Answer:

The prudence concept assumes that the worst can happen and tries to account for it in the accounts.
The provision for doubtful debts is an estimated percentage of debtors that are not expected to pay during the year. All the debtors may pay up during the year, meaning that the provision for doubtful debts was unnecessary, but it still lets the companies account for any possible bad debts during the year.

First answer by Yourcodenameisnick. Last edit by Yourcodenameisnick. Contributor trust: 0 [recommend contributor ]. Question popularity: 1 [recommend question].

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Relevant answers:

Difference between provision for doubtful debt and bad debt?
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