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The double entry of bad debt is:
Example:
Aspring have total accounts receivable at the end of their accounting period of $45,000. Mr A who owes $790, has been declared bankrupt, and another who gave his name as B has totally disappeared owing Aspring $1,240.
Step1
Enter the opening balance in the accounts receivable account.
Step2
As the two debt are considered to be irrecoverable, they must be removed from accounts receivable by a credit entry and a corresponding debit entry to a bad debts expense account.
Step3
The account receivable account must now be balanced and the closing balance would appear in the balance sheet as the accounts receivable figure at the end of the period.
$42,970 would appear in the balance sheet as the figure for accounts receivable under current assets at the end of the accounting period.
Step4
Finally, the bad debts in the balance sheet as the figure for accounts receivable under current assets at the end of the accountng period.
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