Wednesday, 31 August 2016

BAD DEBT

Scenario:
You work for Jules Ltd and a customer’s invoice of £440 has been outstanding for over 1 year and management have decided to write this off as bad debt and the company is not VAT registered. 

Double entry posting:
DR: Bad Debt account                    £440
CR: SLCA/ Debtors accounts        £440
  
Reason:
In writing off a debt, the business is incurring a cost and this is an expense which is increasing, so it has to be debited.

The debtors outstanding balance now has to be reduced because we are writing off the full outstanding debt and this reduces the debtors balance.

REMEMBER:
DEAD/CLIC

N/B:
SLCA is also called Debtors Control Account/ Trade Receivables Account


Yours Sincerely,
The Friendly Team

The Training Place of Excellence Limited

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