Bad debt written off journal entry and concept

Bad or Doubtful debt is a terminology used by accountants for customers' debts who are not able to pay or settle their debt on the grounds of bankruptcy or any other reason given by the customer.

Doubtful debts is the percentage of doubt on debtors. We estimate a provision by applying the percentage on Accounts reaceiveable after making some adjustments. The percentage is calculated by analysing the Market standing, credit rating, amount of debt, and some other parameters.

On the other hand, Bad debts written off is the amount of debt which must be excluded from the books of accounts in order to show the true and fair view of the financial statements. Bank debts written off is the expense in nature and charged to Profit & loss statement of Statement of comprehensive income.

For debts or part of debts, which are confirmed, not be paid by the customers. The terminology used for this total loss of Debt is 'Bad Bebt written off'.

Some examples are as under:

Jan,1: Mr. Adeel has went Bank corrupt and is not able to pay $15,000 of his debt to Kamzori ltd.

Jan, 1: Mr. Salman has went Bank corrupt and is only able to pay 70% of his debt $10,000.