Which voucher is prepared for writing off bad debts. *
Answers
Answer:
A customer has been invoiced 200 for goods and the business has decided the debt will not be paid and needs to post a bad debt write off.
The original invoice would have been posted to the accounts receivable, so the balance on the customers account before the bad debt write off is 200. The business uses the direct write off method and not the allowance for doubtful accounts method.
Journal Entry for the Bad Debt Write Off
The accounting records will show the following bookkeeping entries for the bad debt written off.
Journal Entry for Bad Debt Write Off
Account Debit Credit
Bad Debt Expense 200
Accounts receivable 200
Total 200 200
Bad Debt Write Off Bookkeeping Entries Explained
Debit
The bad debt written off is an expense for the business and a charge is made to the income statement through the bad debt expense account.
Credit
The amount owed by the customer 200 would have been sitting as a debit on accounts receivable. The credit above reduces the amount down to zero.
Answer:
These vouchers are prepared to record the non-cash transactions of the business.
Under the direct write off method, when a small business determines an invoice is uncollectible they can debit the Bad Debts Expense account and credit Accounts Receivable immediately. This eliminates the revenue recorded as well as the outstanding balance owed to the business in the books.
Hope it helps :)