Question

Customer who owed become insolvent in revaluation account

Answer 1

Answer:

Insolvency of a debtor means bankruptcy of debtor.

However there might be two conditions then

No amount is recovered from them

Partial amount is recovered from them.

The amount which is not paid by debtors is loss to the business called bad bebts.

Let take an example:

A debtor amounting Rs50000 became insolvent and nothing was recovered from his estate.

*Bad-DebtsA/c Dr. 50000

To DebtorA/c ………………. 50000

*P&L A/c Dr. 50000

To Bad-DebtsA/c……………50000

2. A debtor amounting Rs50000 became insolvent and only 40% was recovered from his personal estate.

*Cash/BankA/c Dr. 20000

Bad-DebtsA/c Dr. 30000

To Debtors A/c…………….50000

*P&L A/c Dr. 30000

To Bad-Debts A/c…………30000