Account receivable is also known as trade debtors. It is the amounts that the customers owed to the business for invoiced amounts.
It is classified as current assets on the balance sheet but it is different from other non trade debtors and prepayments.
A provision for bad debt is shown against the accounts receivable balance in line with the prudence concept. This is based on the company’s past history of bad debts and its current expectations.
A general provision is based on the percentage of the total credit sales.