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No further adjustment is required.
Bad debts in trial balance. For example if you have a debtors account to the value of 300000 but you realistically expect that some of this may not be received which is the usual case in business then you can create a provision for bad debts. Receivables ledger at 1 May had balances of all ledgers are compiled into debit and credit ledger balances. An entity may not be able to recover its balances outstanding in respect of certain receivables.
Doubtful debts are those debts whose recovery is doubtful. And 2400 is recorded in the second period in bad debt expenses you will credit receivable. Bad debt is when someone owes you money but the debt becomes worthless amounts to nothing because you cant collect it.
Bad debt expense also helps companies identify which customers default on payments more often than others. In case it appears in the trial balance the above-mentioned treatment has to be followed however in case it appears as an adjustment entry then it will be recorded on the credit side of the profit and loss ac as well as on the liabilities side of the balance sheet. In accountancy we refer to such receivables as Irrecoverable Debts or Bad Debts.
Studied that trial balance works as a check of mathematical accuracy of the book keeping. The allowance for doubtful accounts reduces the asset accounts receivable by 58. The accounts reflected on a trial balance are related to all major accounting.
It is not certain whether they will be recovered or not. A trial balance is a report that lists the balances of all general ledger accounts of a company at a certain point in time. Therefore suitable provisions should be made for bad and doubtful debts so as to calculate true net profit of the business.
Writing off an irrecoverable debt means taking a customers balance in the receivables ledger and transferring it to the statement of profit or loss as an expense because the balance has proved irrecoverable. The remainder constitutes the up-to-date figure for receivables and will appear on the balance sheet. We have studied about Purchases Sales Debtors and Creditors in our previous lectures.
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