Your Country :: india
Question Title: :: journal entry
Your Country :: india
Explain your question in detail :: what is the entry for amount receivable
from manu was written off fully
Category :: Education
When an amount receivable from a debtor (in this case, Manu) is written off, it means that the company has determined that the debt is no longer collectible and is removing it from its accounts. This typically happens when it is clear that the debtor cannot pay the outstanding amount.
Journal Entry for Writing Off Receivables
1. Writing Off the Receivable
When you write off a receivable, you need to remove the amount from the accounts receivable and recognize it as a loss or expense. The entry typically involves the following accounts:
- Accounts Receivable: This account is debited to remove the receivable from the books.
- Bad Debt Expense: This account is credited to recognize the loss due to the uncollectible receivable.
Example Journal Entry
Assume Manu owes ₹10,000, and the amount is written off fully. The journal entry would be:
mathematica
Date: [Date of Write-Off]
Bad Debt Expense ₹10,000
Accounts Receivable (Manu) ₹10,000
Explanation:
- Bad Debt Expense: This account is debited to reflect the expense associated with the uncollectible amount. This expense appears on the income statement.
- Accounts Receivable (Manu): This account is credited to remove the amount from the accounts receivable balance, effectively reducing the total receivables.
Adjustments if Using Allowance Method
If your organization uses the allowance method for bad debts, the write-off would be handled slightly differently. In this case, the company will have already estimated bad debts and set aside an allowance.
Journal Entry under Allowance Method
When writing off a receivable under the allowance method, the entry would be:
mathematica
Date: [Date of Write-Off]
Allowance for Doubtful Accounts ₹10,000
Accounts Receivable (Manu) ₹10,000
Explanation:
- Allowance for Doubtful Accounts: This account is debited, which reduces the balance in the allowance for doubtful accounts. This account is a contra-asset account that offsets the accounts receivable.
- Accounts Receivable (Manu): This account is credited to remove the amount from the accounts receivable balance.
Note:
- Allowance Method: This approach anticipates potential bad debts and makes provisions in advance.
- Direct Write-Off Method: This method recognizes bad debt expenses only when an account is deemed uncollectible, as shown in the first example.
Summary
- Direct Write-Off Method: Debit Bad Debt Expense, Credit Accounts Receivable.
- Allowance Method: Debit Allowance for Doubtful Accounts, Credit Accounts Receivable.
Ensure you follow your organization’s accounting policies and procedures, and comply with relevant accounting standards when recording such transactions.
