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Sir, a comapny has been notified that its customer has been declared bankrupt! The company had previously declared an allowancef or it. What shall be the double entry
I know it should be Credit receivables, but do we debit Allowances or Debit irr debts?
Why are you not watching the lectures (because this is covered in the lectures)?
I cannot type out all my lectures here!!You credit receivables and debit irrecoverable debts expense.
That is the only entry.(And obviously you do not include the irrecoverable debt in the calculation of whatever allowance is required at the end of the year)
You can do that by all means, but it just means more work (and can cause confusion in the middle of an exam).
It ends up giving exactly the same final result because if you don’t debit the irrecoverable debts expense then the expense ends up lower. However if you debit the allowance, then the expense of increasing the allowance is higher. So the end result is exactly the same.
I do say this in my lectures!!
(Also you won’t be asked in the exam to write up t-accounts for irrecoverable and doubtful debts.)
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