Bad Debts

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Please help, I was sick when the class did this.<BR><BR>From what I understand Bad debts in a trial balance is entered on the P+L as an expense. Nothing eles is done with this unless there is an additional note stating that the bad debt is to be written off and therefore the amount is taken off the debtors before being entered on the the balance sheet.<BR><BR>Ta.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Bad Debts

    are you tlaking bad debt or provisions for bad debt ?<BR><BR>your right about bad debt its an expense and you can reclaim the VAT but if its provisions for bad debt it will be an accural as its an expected expense
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Bad Debts

    'Bad debt' would only go to P+L as an actual expense when the decision has been made to write it off.<BR><BR>An accrual of the expense would be 'bad debts provisions', though I am unsure where this account sits, can someone confirm please?<BR><BR>I'm guessing it still sits in the P+L as it effectively affects the profit?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Bad Debts

    I think the provision for bad debt will go in the balance sheet as a liability and pre payments would be an asset.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Bad Debts

    Ok, got it....<BR><BR>When you decide to make a provision for bad debts, you would:<BR><BR>DR Bad debt expenses (P+L)<BR>CR Bad debt provisions (balance sheet)<BR><BR>Then when the decision is made to write the monies off:<BR><BR>DR Bad debt provisions<BR>CR Debtors<BR><BR>If you got some money in from the debtors BEFORE writing the money off, then:<BR><BR>DR Cash or Bank (depending on how it was received in!)<BR>CR Creditors<BR><BR>DR Bad debts provisions<BR>CR Bad debts expenses<BR><BR>If the money came in AFTER it had been written off then:<BR><BR>DR Cash or Bank <BR>CR Bad debt expenses<BR><BR><BR>Beka - can you explain what you mean about the pre-payments please? Thanks!

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