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Hello sir
On 1jan 2003 a business’s trade receivable were 10000. The following relates to the year ended 31dec 2003Credit sales 100,000
Cash receipts 90,000
Discount allowed 800Cash receipts include $1,000 in respect of a receivable previously written off.
In answers for trade receivable they have written 10,000 100,000
And 1000 As debit balance.
Can you please help me that why they made the dr balance of 1000 in trade receivable ledger account ? For recovered debts that is received is we should dr cash and cr bad debts. So please help meI can’t really answer without seeing the whole question and answer.
My guess is that for the cash receipts they have debit cash and credited receivables (which is obviously what normally happens).
Here, however, the 1,000 should not have been credited to receivables (only the remaining 89,000) and so to correct it, debit receivables and credit irrecoverable debts expense account (which is where it should have gone in the first place).
By the way, we stopped calling it the bad debts account many years ago 🙂
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