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Bad and Doubtful Debts

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    Tashika B.
    US
    Tashika B.

    Bad and doubtful debts can impact a asset how?

    BabaJide Martins F.
    TR
    BabaJide Martins F.

    Agreed! If bad debts were paid, what happen next?

    Alice B.
    GQ
    Alice B.

    As managers, we have to be careful to avoid written offs and welcome more receiveables that is reduce expenses and increase revenue to the business, to make more profits.

    Hermina S.
    LC
    Hermina S.

    understood.

    Morne V.
    ZA
    Morne V.

    A bad debt is an amount owed by a debtor that is unlikely to be paid due, for example, to a company going into liquidation, and Doubtful debts are those debts which a business or individual is unlikely to be able to collect

    Sunday O.
    NG
    Sunday O.

    Bad and doubtful debts

    Odongo M.
    UG
    Odongo M.

    Accounting -> Topics -> Balance day adjustments -> Bad and doubtful debts Bad and doubtful debts There are two possible situations for bad debts. Where a bad debt occurs in the same period as the credit sale then the entry is: General journal $ $ Bad debts 200 Debtors 200 Bad debt recorded against debtors This is all that is involved. At the end of the period the bad debt is posted to the Profit and Loss account. Where the bad debt occurs in a later period, when the credit sale is made in the first period, it is anticipated that part of the funds owing on that credit sale will not be received. The business sets up an allowance account. General journal $ $ Period 1 Doubtful debts 500 Allowance for doubtful debts 500 Allowance created for doubtful debts Period 1 Profit and Loss a/c 500 Doubtful debts 500 Doubtful debts posted to Profit and Loss a/c In period 2 the actual bad debt occurs. Let us suppose it is $450, then the following transaction occurs: General journal $ $ Period 2 Bad debts 450 Debtors 450 Bad debt recognised for debtors Period 2 Allowance for doubtful debts 450 Bad debts 450 Doubtful debts posted to Allowance for doubtful debts General ledger Doubtful debts Period 1 Allowance for doubtful debts 500 Period 1 Profit and Loss a/c 500 Allowance for doubtful debts Period 2 Bad debts 450 Period 1 Doubtful debts 500 Debtors Period 2 Bad debts 450 Bad debts Period 2 Debtors 450 Period 2 Allowance for doubtful debts 450

    Manish K.
    NP
    Manish K.

    bad debts, doubtful debts and sundry debtors are clearly given.

    Penelope M.
    US
    Penelope M.

    understood

    Penelope M.
    US
    Penelope M.

    I that a cushion was put up for such an indiscretion, of $500, and the bad debt was $450.00

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