Trade receivables Management

Question 1

Writing off irrecoverable debts

Answer 1

Reduce profit of the business for the period and reduce the receivable balance ( asset)

Question 2

Irrecoverable (bad)debts
In Order to make this reclaim of VAT on bad debts the following conditions need to met

Answer 2

1) The debt is more than 6 months and less than four years six mouthh overdue and
2) The debt has been written off in the books and
3) The debt has not been sold to a factoring company and
4) The VAT has been paid to HMRC