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a company has been notified that a customer has been declared bankrupt. the company had previously provided for this doubtful debt. correct entry?
A) Dr. irrecoverable debts Cr. receivables
B ) Dr. allowance for receivables Cr. ReceivablesThanks
There is more than one way of dealing with previously provided for debts. Both end up with the same final expense.
The best way is to deal with all irrecoverable debts the same way:
DR Irrecoverable debts expense a/c and CR Receivables.When you come to calculate the total allowance needed at the end of the year, you will not include this debt that was previously doubtful in the total.
You then adjust the existing allowance to the allowance required – the double entry for the difference being to the Irrecoverable debts expense a/c.
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