Module 7 Flashcards
Double entry if bad debt is written off?
Dr P+L bad debt expense
Cr Trade debtors
Net effect of debtor paying payment that had be written off as bed debt?
Dr Bank
Cr P+L - bad debt expense
What is provision?
A liability if uncertain timing in
Two types of provisions for bad debt
Specific provision
General provision
What is bad debt?
Know for certainty won’t get it
How to account for bad debt?
An expense
Reduce trade receivables as wont get it
What is an allowance account?
Net of specific divisions and bad debts
Where does the net of specific divisions and bad debts go?
Allowance account
Provisions are?
Deducted from the asset to give a net figure
Estimates
Credit balances
If you realise a payment is not going to be received you
Debit the p+l and call it bad debt expense account
Reduce trade debtors as it’s bad
Credit trade debtors balance
Write off : dr p+l bad debt expense
Cr trade debtors
What are sales and purchase ledgers?
Detailed records of all, use one figure in nominal ledger as summary
Not in nominal, no double entry
Bad debt write off as
Bad debt expense
Provision for bad debts is a
Reduction in an asset
Two types of provision
Full-specific
Partial-specific
What is full specific provision?
100% of specific customer balances
What is a general provision?
Estimate a % will not pay
Double entry for provision
Debit bad debts Credit provision (reduction in an asset so credit)
From provision to bad debt double entry
Debit provision
Credit receivables
Double entry if a provision goes down
Dr provision
Cr bad debt expense
Double entry if provision goes up
Cr provision
Dr bad debt expense
If the debtors pays later how is the payment recorded?
Reinstate write offs:
Dr trade debtors
Cr p+l bad debt expense
Receive cash:
Dr bank
Cr trade debtors
So:
Dr bank
Cr bad debt expense
