Answer to Question #171908 in Accounting for Thato Phuti

Question

T. Taylor, who owed us R5 800, is declared insolvent His estate paid us a dividend or 40 cents in the rand. The bookkeeper had only recorded the entry for the receipt you are required to record the irrecoverable amount

Answer 1

An irrecoverable debt is a debt which is, or is considered to be, uncollectable. With such debts it is prudent to remove them from the accounts and to charge the amount as an expense for irrecoverable debts to the income statement.

The double entry used when removing a bad debt is: Debit bad debt account with net figure. Debit VAT account with VAT figure. Credit Sales ledger control with Gross figure of R5 800.