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Journal Entry for Bad Debts and Bad Debts Recovered

Last Updated : 05 Apr, 2023
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Bad Debts:

When the goods are sold to customers on credit, there can be a situation where a few of them fail to pay the amount due to them because of insolvency or any other reason, and then the amount that remains unrecovered is called Bad Debts.

Journal Entry:

 

Example: 

  1. Amount due from Gaurav ₹5,000 is irrecoverable as he became insolvent.
  2. Gaurav, from whom the amount due was ₹5,000, became insolvent, and only 60 paise in a rupee is recovered from his estate.

Solution:

 

Bad Debts Recovered:

When the amount that is earlier written as bad debts, is now recovered, it is called bad debts recovered.

Journal Entry:

 

Example: A sum of ₹2,000 earlier written as bad debts is now recovered.

Solution:

 


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