Realisation of Assets and Liabilities - Comprehensive
New bad debts...
Question
New bad debts are added to ______.
A
Creditor account
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B
Debtors account
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C
Bad debts account
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D
Cash account
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Solution
The correct option is D Bad debts account Bad debts refer to the amount that the firm has not been able to realize from the debtors. It is regarded as a loss and is termed as bad debt. The entry for recording bad debts is:
Bad Debts A/c Dr.
To Debtors A/c
Items appearing in the trial balance are transferred to Trading account or Profit and Loss account or the balance sheet. New bad debts are added to bad debts account.