Bad debt refers to an amount owed by a debtor that is unlikely to be recovered, such as when a company goes into liquidation. The full amount should be written off to the profit and loss account of the relevant period or to a provision for bad debts upon identification, in line with accounting prudence principles.
Doubtful debt refers to an amount owed to an organization by a debtor that is unlikely to be received. Organizations often create a provision for doubtful debts based on specific debts or general assumptions about debtor reliability.
