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Accounting for irrecoverable debts and allowances for receivables






                           Accounting for irrecoverable debts




               1.1   Irrecoverable debts

               When it becomes known that a customer is unlikely to pay, the receivable balance
               must be removed (since it is no longer an asset of the business) and transferred to
               the statement of profit or loss as an expense for the period.  This may also be
               referred to as a bad debt.


               The double entry will be:

               Debit       Irrecoverable debts expense account

               Credit      Receivables account

               There may be circumstances where only part of the debt needs to be written off as
               an expense.

               One irrecoverable debts account is used to record all irrecoverable debts occurring
               during a year. At the end of the year the balance on the irrecoverable debts expense
               account is transferred to the statement of profit or loss.










































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