1. Bad Debts: When it is definitely known that amount due from a customer (debtor) to whom goods were sold on credit, cannot be realised at all, it is treated as bad debts.
2. Provision for bad and doubtful debts refers to amount set aside as a charge against profit to meet any loss arising due to bad debt in future.
3. Cash discount is allowed by the suppliers to customers for prompt payment of amount due either on or before the due date.
