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(25)-ACCOUNTING ENTRIES FOR BAD DEBTS WRITE OFF

Friday, November 13, 2009

Accounting entries for bad debts write off

For bad debts written off there is a bad debts account. The double entry bookkeeping is fairly straightforward, but there are two separate transactions to record.
  • When it is decided that a particular debt will not be paid, the customer is no longer called an outstanding debtor, and becomes a bad debt.
    Bad debts account (expense) - Debit
    Debtors account - Credit
  • At the end of the accounting period, the balance on the bad debts account is transferred to the profit and loss account.
    Profit and loss account - Debit
    Bad debts account - credit

Where a bad debt is subsequently recovered in the same accounting period, you simply reverse the entries in above and so there will be no need to carry out the entries in above.
Debtors account - Debit
Bad debts account - Credit

However, where a bad debt is subsequently recovered in a later accounting period the accounting entries will be as follows.
Debtors account - Debit
Bad debts recovered - Credit

Bad debts recovered account identifying as income in the profit and loss account.

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