Chapter 10: Bad & Doubtful Debts

Question 1

Bad & Doubtful Debts

Net Debtors is Calculated as?

Answer 1

Debtors - Provision For Doubtful Debts.

A Reduction in The Carrying Value of Net Assets.

Question 2

Bad & Doubtful Debts

Under FRS 102, What Are The Following Terms Refered to as:
* ‘Bad and Doubtful Debts’ & ‘Provision for Doubtful Debts’?
* ‘Debtors’?

Answer 2

• ‘Impairement Losses’
• ‘Receivables’

Question 3

Bad & Doubtful Debts

A Bad Debt Arises When?

Answer 3

A Debtor is Unable or Unwilling to Pay An Invoice.

Question 4

Bad & Doubtful Debts

A Doubtful Debt Arises When?

Answer 4

A Debt Becomes Uncertain.
* Many Debtors; the Law of Averages & Human Nature Suggests a Proportion May Never be Received
* Press Information May Hint at Possible Bankruptcy or Insolvency of a Customer

Question 5

Bad & Doubtful Debts

To Account For a Bad Debt, we:

Answer 5

• Dr Bad Debt Expense (P&L)
• Cr Debtors (B/S)

Question 6

Bad & Doubtful Debts

To Account For a Provision For Doubtful Debts, we:

Answer 6

• Dr Bad Debt Expense (P&L)
• Cr Provision For Depreciation (B/S)

Question 7

Bad & Doubtful Debts

To Reflect The Recovery of a Bad Debt, we:

Answer 7

• Dr Bank
• Cr Bad Debt Expense

Realised As Income.

Question 8

Bad & Doubtful Debts

How Are Bad & Doubtful Debts Treated For Tax Purposes?

Answer 8

Both Bad Debts & Provisions Are Allowed to Reduce Profits.
* They Relate to a Specific Debtor Who Can be Identified & Evaluated

An Important Element of The Tax Computation.