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Difficulty: MediumBad Debts Written Off and Bad Debts Recovered

Complete the statement describing the standard double-entry bookkeeping procedure for writing off an irrecoverable debt.

Answer:When an amount owed by a trade customer is determined to be uncollectible and written off at the financial year-end, the accounting entry requires debiting the 【Bad Debts】 Account and crediting the 【Debtors】 Account.

Answer

The first blank is 'Bad Debts' and the second blank is 'Debtors' (or 'Trade Debtors').
Writing off an irrecoverable debt increases expenses (debited to Bad Debts Account) and reduces trade receivables (credited to Debtors Account).

Step-by-Step Solution

1
Determine which account reflects the loss incurred from uncollectible debts.
The Bad Debts Account is recognized as an expense account and must be debited.
Losses and expenses are debited according to the fundamental rules of double-entry bookkeeping.
2
Determine which account is reduced as a consequence of writing off the debt.
The Debtors (Trade Receivables) Account is credited.
Assets decrease on the credit side, so reducing the amount owed by customers requires a credit entry.

Key Concept

Double Entry for Bad Debts Written Off
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Topics

Bad Debts Written Off and Bad Debts Recovered

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