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Question

If the amount of bad debts appears in trial balance it is only recorded on ________.


A
credit side of profit & loss account
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B
debit side of profit & loss account
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C
debit side of trading account
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D
current assets
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Solution

The correct option is C debit side of profit & loss account
Sometimes, some people fail to pay their dues either partially or completely. The amount that is irrecoverable is a loss and known as "Bad Debts". Bad Debts refer to the amount that the firm has not been able to realize from its debtors. It is regarded as a loss. The following entry is passed when a debit becomes bad:
Bad Debts A/c Dr.
     To Debtor's A/c
As an effect of this entry, the debtor's account is closed and a new account called bad debts account is opened which is transferred, at the end of the year, to the Profit and Loss Account (debit side). Items appearing in the trial balance are only recorded in the debit side of profit and loss account.

Accountancy

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