BANKING AFFAIRS

Detailed explanation-1: -Debts that are no longer recoverable and written off as losses/expenses are called bad debt. For example, loans from banks and sales made on credit can be categorized as bad debt.

Detailed explanation-2: -Writing off an irrecoverable debt means taking a customer’s balance in the receivables ledger and transferring it to the statement of profit or loss as an expense, because the balance has proved irrecoverable. Irrecoverable debts are also referred to as ‘bad debts’ and an adjustment to two figures is needed.

Detailed explanation-3: -Bad debt refers to loans or outstanding balances owed that are no longer deemed recoverable and must be written off.

Detailed explanation-4: -What are irrecoverable debts? Amounts owed to a business that it believes will never be paid. If a business makes sales on a credit basis then it sells goods or services to customers, agreeing that payment will be delayed for a period of time, usually 30 days.

Detailed explanation-5: -Bad debt is a type of account receivable for an organisation that has become uncollectible from the customer due to the customer’s inability to pay the amount of money taken on credit from the organisation.