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What is Deference Bad debts and Doubtful debts?
It is denitely irrecoverable lead to charged as an expenses and the account, But how is the particular debtor has to written off as bad as soon as it is know. Sorry My word disturb you all, Forgiven i am new one?
1 Answer
- SandyLv 71 decade agoFavorite Answer
You mean what's the difference between bad and doubtful debts? Bad is when there is no hope of recoverability, like when your customer has gone bankrupt. When that happens, you write off the debt directly.
Dr Bad debts written off (income statement)
Cr Accounts receivable (balance sheet)
A doubtful debt is merely doubtful of recovery. Perhaps the debtor has been outstanding for more than 180 days and you're a bit worried, but you know he hasn't gone bankrupt and you still have some hope. In this case you make an allowance for the debt.
Dr Allwance for doubtful debts expense (income statement)
Cr Allowance for doubtful debts (balance sheet)
