Bad Debts Flashcards

1
Q

Define bad debt

A

An irrecoverable debt is an amount owing to a business which will not be paid
Debit: Bad debt - Expense in Income Statement
Credit: Debtor’s name

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2
Q

Define bad debts recovered

A

A debt previously written off is now paid
Debit: Bank
Credit: Bad debts recovered - Income in Income statement

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3
Q

How to reduce bad debt?

A

Have a strict credit control policy:
Send out regular statements
Change interest on overdue accounts
Do not supply further goods on credit until account is paid

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4
Q

How is the amount for provision for doubtful debts established?

A

Looking at the individual debtors’ accounts
Estimating on past experience
Considering the length of time debts have been outstanding

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