Bad debt written off journal entry and concept

Bad or Doubtful debt is a terminology used by accountants for customers’ debts who are not able to pay or settle their debt on the grounds of bankruptcy or any other reason specified by the customer.

Doubtful debts are the percentage of doubt in debtors. We estimate a provision by applying the percentage on Accounts receivable after making some adjustments. The percentage is calculated by analyzing the Market standing, credit rating, amount of debt, and some other parameters.

On the other hand, Bad debts written off are the amount of debt that must be excluded from the books of accounts in order to show the true and fair view of the financial statements. Bank debts written off is the expense in nature and charged to the Profit & loss section of the Statement of comprehensive income.

For debts or part of debts, which are confirmed, not be paid by the customers. The terminology used for this total loss of Debt is ‘Bad Bebt written off’.

Some examples are as under:

Jan,1: Mr. Adeel has went Bank corrupt and is not able to pay $15,000 of his debt to Kamzori ltd.

Jan, 1: Mr. Salman has went Bank corrupt and is only able to pay 70% of his debt $10,000.

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