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Bad debts are debts that can't be payback by debtors whereas doubtful debts are debts that can't be recovered the management.
bad debt is an amount which the business can't recover from the debtor while doubtful debt is an estimated amount set as side as the amount not to be recovered
Bad debts can rundown your company progress
When in the accounting period a manager suppose to recognize a doubtful or a bad debt?
Accounting -> Bad debts Bad debts Bad debts derive from debtors have been identified by management as being unable to pay outstanding debts. Once management determines that certain debtors are not going to pay the asset debtors is reduced and the expense bad debts is recognised. In the general journal this would be shown as: Date Account Debit Credit 15 Nov. Bad debts 450 Debtors 450 Debtors account written off as not recoverable Bad debts will be shown as a financial expense in the Profit and Loss statement. Bad debts may well be assessed in the context of control accounts or separately. You must be able to separate the treatment of bad debts, firstly when the bad debt occurs in the same period as the credit sale, and secondly, when the bad debt happens in the later period. Doubtful debts are an estimate of the amount not likely to be recovered from debtors. It is general and not linked to any specific debtor. It is allowed for by a business in order to try to match the expense associated with a revenue (credit sale) in the same reporting period in which the revenue was earned. Doubtful debts are the anticipation of bad debts.
What are bad debts?
Bad debts may well be assessed in the context of control accounts or separately. You must be able to separate the treatment of bad debts, firstly when the bad debt occurs in the same period as the credit sale, and secondly, when the bad debt happens in the later period.
doubtful debts lead us to bad debts when they become certain of the inability to pay.
How to prepare a general journal correctly!
Bad debt is a debt that customers who purchase our product on credit is believe not to pay. It is treated as expenses in the profit and loss account at the debit side.