8.3.10 Bad Debts
Sometimes, a debtor may fail to gay his debt either partially or completely. The
amount of debt which cannot be recovered from the debtor is called Bad Debts and it
wiU be a loss to the business. The following journal entry is passed when a debt
becomes bad.
Bad Debts A/c Dr.
To Concerned Debtor's A/c
The effect of this entry will be
(i) debtor's personal account stands, closed, and
(ii) a
new account called 'Bad Debts Account' is opened in the books.
The total amount of bad debts incurred during the year appears as a separate item in
the Trial Balance and the sundry debtors appear at the reduced amount. The bad
debts like any other expense or loss are charged to the Profit and Loss Account.
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