Bad and Doubtful Debts Flashcards
What will be the result of an increase in the doubtful debt provision?
An increase in the doubtful debt provision will reduce profits
What will be the result of a credit to the bad debts expense?
It will increase profits
What will be the result of an increase in the provision for doubtful debts on the bad debt expense T account?
There will be a debit entry to the bad debts T account
What does FRS 102 refer to debtors as?
Receivables
What does FRS 102 refer to bad and doubtful debts as?
Impairment losses
How do you increase the size of a bad and doubtful debts provision?
Credit bad debt provision T account
What happens to cash received from a debtor which has been written off?
It will be credited to the bad debt expense
How would you record the recovery of a debt previously provided for?
Debit bank, credit debtors
How do you record a decrease in the provision for doubtful debts?
Debit provision for doubtful debts
Credit bad debt expense
How does the credit to a provision of doubtful debts impact the value of net assets?
It will reduce the value of net assets
When are trade discounts given?
At the point of sale
What are the correct journal entries required to close off the bad debt expense account and transfer to the profit and loss account?
DEBIT Profit and loss account
CREDIT Bad debt expense
When does a bad debt arise?
A bad debt arises when a debtor is unwilling or unable to pay their invoices
When does a doubtful debt arise?
Where a payment of a debt becomes uncertain
