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Bad debts

Bad debts

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I am probably confusing myself, but could someone let me know what the correct journal for a bad debt is? I have trade debtors of £13,433 of which £65 is a bad debt per the client. So what journal do I need to process? Cr trade debtors Dr bad debts on the balance sheet? Or Cr bad debts on the balance sheet Dr bad debts P&L? Thanks!

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By johngroganjga
03rd Sep 2015 12:35

The debit is to the P& L.

The debit is to the P& L.

If you think about it, putting the debit in the balance sheet would achieve nothing and you would be wasting your time. 

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Hallerud at Easter
By DJKL
03rd Sep 2015 12:58

If vat involved I tend to:

Dr Bad debt

Cr Bad debt provision

Then  when the debtor is removed from the sales ledger( Journal adjustment/ Credit note, depends on system) and vat correctly accounted for,  I post the Debit to the bad debt provision.

The reason I take this approach is that accountants preparing accounts  for clients have a nasty tendency not to inform clients about the adjustment needed to their accounting systems and clients, even when told ,have a nasty habit of not actually doing what is advised. Using the provision helps to keep control of the correct bookkeeping and vat treatment, especially when write offs/provisions are taking place post year end.

 

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By Christina_2014
03rd Sep 2015 13:49

Thank you both, makes more sense now :)

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By Democratus
03rd Sep 2015 13:51

If a provision is already there...

It's 

Cr Balance Sheet - Trade Debtor Gross

Dr Balance Sheet - Sales Vat Bad Debt - if applicable

Dr Balance Sheet - Bad Debt Provision with the balance.

 

 

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