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year ended 31st March 2021
Trade Receivables 14,180
Allowance for Trade Receivables 3,000As at 31st March 2021, there was a customer who had an outstanding balance of Rs.2.5 million was overdue for more than 360 days. This amount was already provided in the accounts. However, an amount of Rs.2.2 million was settled by the customer in April 2021 and the balance was decided to write-off as bad debts during the year ended 31st March 2021.
The board of directors of the company approved the financial statements for issue on 30th May 2021.
Sir, could you kindly specify the entries related to this adjustment?
You enter the cash received in the normal way.
You then write off the remaining balance by crediting receivables and debiting the irrecoverable debts expanse account.
2.5m of the allowance is no longer needed and so debit the allowance and credit the irrecoverable debts expense account.
Have you watched our free lectures on irrecoverable and doubtful debts?
I actually watched them, but I got a bit confused with some parts.
Thank you so much for the detailed explanation. That really helped me clarify my doubt.
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