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Question

In case of a debt becoming bad, the amount should be credited to _______________.


A
Debtors Accounts
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B
Bad debts A/c
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C
Sales A/c
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D
None of these
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Solution

The correct option is C Debtors Accounts
In the normal course of business, there are certain customer who does not pay the amount to the business despite regular follow ups. The unrecoverable amount is considered as bad debts. Bad debts is a loss to the organization and should be debited to profit & loss account by crediting the customer account.

Accounting entry will be as under:
Bad Debts A/c                       Dr.
   To Customer (Debtor) A/c 

Fundamentals of Accounting and Auditing

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