Bad debts

Question 1

What is the double entry for writing off a debt?

Answer 1

Credit - receivables
Debit - Irrecoverable debt expense

Question 2

What is the double entry for a written off debt that gets paid?

Answer 2

Credit - irrecoverable debt expense
Debit - cash

Question 3

What is the double entry for a specific bad debt allowance?

Answer 3

Credit - allowance
Debit - irrecoverable debts

Question 4

What is the difference between specific and general bad debt allowance?

Answer 4

Specific is a fixed amount from single company

General is a % of the total receivables

Question 5

What is the double entry for a general bad debt allowance?

Answer 5

Credit - receivables (full amount)
Debit - Cash (full amount-%)
Debit - allowance (%)

Question 6

What is a general provision?

Answer 6

Estimate

Question 7

What is the effect of a reduction in the allowance for receivables?

Answer 7

Decrease irrecoverable debt expense

Results in increase of net profit

No effect on P&L