Irrecoverable Debts

Hi! I am just about to sit my exam in the next few weeks for Control Accounts, Journals and the Banking System, and I am having a terrible time with distinguishing between a debit and a credit, especially when it comes to an irrecoverable debt and showing the journal entries needed to write off this debt. Would anyone be able to help me understand the journal entries, please?
Thank you.

Comments

  • CeeJaySixCeeJaySix Well-Known Posts: 645Registered
    DEADCLIC is a useful mnemonic here:

    Debits - Expenses, Assets, Drawings
    Credits - Liabilities, Income, Capital

    With respect to writing off a bad debt:

    The debt itself is an asset, so recorded as a debit. To write off this debt and remove it from the records, you therefore need to create the opposite - a credit. This would be posted to the sales ledger control account on the balance sheet.

    On the principles of double-entry, you therefore need a debit to balance this credit. This makes sense as to write-off the debt, you are incurring an expense. The entry goes to the bad debt expense account in the P&L.
  • HannahBHannahB Posts: 2Registered
    Thank you so much, this has made it much clearer with me and I can feel it finally clicking!
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