Bad Debt write off query

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Currently doing progress test with my college. Having written to client, they have informed me a debtor is possibly going bad as they have heard on the grapevine he could be going bankrupt.

As this info is received from the client 3 months after the yearend - do I write this off in the next financial year - very confused pls help :?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Bad Debt write off query

    Hello
    I did EXACTLY the same progress test - am guessing we're using the same college (although I am distance learning). Anyway...
    I did write it off. I thought that although she didn't find out until recently that the debtor was going bankrupt, it's still a debtor at the year end, and is still "bad". Then I calculated the 5% provision on the remaining balance.
    Hope that helps.
    Kate
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Bad Debt write off query

    Thanks Kate

    Thanks for your reply

    Having thought about it, I have taken a view that the debt should be written off as bad but need to point the 6 month on bad debts.

    Good luck for the exam.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Bad Debt write off query

    Hi

    Can you write off a debt that you do not know for sure is bad and 3 months after the books have closed? The end of year accounts are supposed to be a snapshot at a set date and if the info came in 3 months after the "books closed" then the information is not relevant to that particular end of year accounts.

    The information can be used to stop any further sales and proceed to implement relevant action

    Eva :D
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Bad Debt write off query

    You do write it off. I have spoken to my managers.
    You have to consider that the director of a company will not sign the balance sheet until after the year end, and if at that point, he knows that the accounts do not give a true and fair view, then it's wrong for him to sign them.
    You have to consider all the events until he signs the accounts.
    At the year end, they have that debt, they are unlikely to receive that debt, therefore it cannot be considered an asset.
    Hope I've made sense :)
    xxx
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Bad Debt write off query

    I apologise for the duff information, I was going by what I was taught by my tutor.
    Eva :D
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Bad Debt write off query

    I didn't mean to come across as rude!!! It's all helpful, makes you think more doesn't it. I mean, I might not have spoken to my managers about it if we hadn't been discussing it, and now I understand it even more :)

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