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I watched your lecture but I had some doubts. I hope you would not mind.
1) Is it true that irrecoverable debt is actually written-off bad debt?
2) Is it also true that doubtful debt is allowance for bad debt?
3) Entry for doubtful debt:
Bad debt expense DR
Allowance for bad debt CR4) Entry for irrecoverable debt:
Bad debt expense DR
Receivables CR5) Is it correct that doubtful debt + irrecoverable debt are both expensed out in SOPL?
THANKS for your Time… 🙂
1. Irrecoverable debts are debts where we do not think we will get paid. We will normally write off those debts.
2. A doubtful debt is one where we think we might not be paid, but still hope to be paid. We call the allowance and allowance for receivables, not an allowance for bad debts.
3. Yes (although the full name of the expense account is irrecoverable and doubtful debts expense account. We do not call them bad bets any more – we call them irrecoverable debts.)
4. Correct
5. The expense is the cost of increasing the allowance plus the cost of irrecoverable debts.
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