THEORY AND JOURNAL ENTRY FOR
IRRECOVERABLE DEBTS
Name:______________________
Class:_______________________
, THEORY FOR IRRECOVERABLE DEBTS
1.Explain the following questions
What are Irrecoverable debts?
- Irrecoverable /bad debt Amounts owing to a business which will
not be paid by the credit customer.It is written off.
What is meant by Bad debts recovered?
- Bad debts recovered
Some Amounts received from a credit customer after the amount
was written off as a bad debt
What is meant by Bad debts recovered Account?
Bad Debts Recovered Account is prepared when some amount is
recovered from bad debts before end of year
What is meant by Provision for doubtful debts?
- A Provision for doubtful debts An estimate of the amount is
maintained in books which a business will lose because of
bad debts.
2.Explain why it is necessary to provide a provision for irrecoverable
debts.
● A provision for doubtful debts ensures that
● the profit for the year is not overstated
● the trade receivables are not overstated
3. Distinguish between an irrecoverable debt and a provision for an
irrecoverable debt.
Bad Debts Provision of irrecoverable debts
Actual bad debts from the last Estimate of possible debts in the
, period next period
It is actual figure It is an estimate only
Expense of the period entered in Increase in provision is recorded as
the income statement income and decrease is recorded
as expense in income statement
Theses have occurred in current This assumes a debt might occur in
year future and hence allocates some
money every year,application of
prudence concept
4.How could the Business ensure that the debtors pay on time?
a. Improve credit control
b.Charge interest on overdue payments
c. Send invoices and/or statements of account regularly
d.Offer cash discount
IRRECOVERABLE DEBTS
Name:______________________
Class:_______________________
, THEORY FOR IRRECOVERABLE DEBTS
1.Explain the following questions
What are Irrecoverable debts?
- Irrecoverable /bad debt Amounts owing to a business which will
not be paid by the credit customer.It is written off.
What is meant by Bad debts recovered?
- Bad debts recovered
Some Amounts received from a credit customer after the amount
was written off as a bad debt
What is meant by Bad debts recovered Account?
Bad Debts Recovered Account is prepared when some amount is
recovered from bad debts before end of year
What is meant by Provision for doubtful debts?
- A Provision for doubtful debts An estimate of the amount is
maintained in books which a business will lose because of
bad debts.
2.Explain why it is necessary to provide a provision for irrecoverable
debts.
● A provision for doubtful debts ensures that
● the profit for the year is not overstated
● the trade receivables are not overstated
3. Distinguish between an irrecoverable debt and a provision for an
irrecoverable debt.
Bad Debts Provision of irrecoverable debts
Actual bad debts from the last Estimate of possible debts in the
, period next period
It is actual figure It is an estimate only
Expense of the period entered in Increase in provision is recorded as
the income statement income and decrease is recorded
as expense in income statement
Theses have occurred in current This assumes a debt might occur in
year future and hence allocates some
money every year,application of
prudence concept
4.How could the Business ensure that the debtors pay on time?
a. Improve credit control
b.Charge interest on overdue payments
c. Send invoices and/or statements of account regularly
d.Offer cash discount
