Providing for Bad Debts

In this chapter we are going to look at an adjustment involving debtors. It will enable the true amount of bad debts for a period to be included in that period’s profit and loss account. In addition the asset ‘debtors’ will be shown at its proper value in the balance sheet. There are two methods of book-keeping that can be used and both of these will be illustrated. When you have mastered the process of providing for bad debts and recording the recovery of debts previously written off as bad, there will be an opportunity to gain extra practice in the preparation of final accounts.