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How are recognition and recovery of bad debts recorded, reported and controlled? [closed]


How are recognition and recovery of bad debts recorded, reported and controlled?

closed with the note: The previous answer is sufficient enough.
asked Jun 22, 2013 in IAS 39 - Financial Instruments: Recognition and Measurement by joesen18 Level 1 Member (1,560 points)
closed Jun 23, 2013 by joesen18

1 Answer

+1 vote
When you receive money from a debtor you generally debit the cash account and credit the respective debtor account. However If you have already written off the debtor, then there will be no debtor account to credit. In which case you could credit the other/miscellaneous income account. (You would have already debited P&L when you wrote off the debtor).

But if you have only made an impairment provision for the debtor, you should still have the debtor account in your books because when you make a provision you just credit the provision account and debit the P&L as an expense. Therefore you can debit cash & credit the debtor and finally reverse the provision you had originally made.

When you write off or provide for a specific debtor, it is just an internal accounting entry which your debtor/customer does not know about. Therefore your debt collectors should be advised to keep trying to collect the outstanding debtor.

I guess I answered your question.
answered Jun 22, 2013 by kisoor Level 2 Member (3,630 points)


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