Bad Debts
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Adjustments at the Balance Date and Preparation of Sole Proprietorship Financial Statements
MS: Hutang Lapuk · EN: Bad Debts · ZH: 坏账
Meaning
Bad debts are amounts owed by debtors that are confirmed to be uncollectible and are therefore written off from the accounts. They are recorded as an expense in the Income Statement and reduce the debtors balance. Bad debts differ from a provision for doubtful debts, which is only an estimate.
Example
Indah Furniture Shop finds that its debtor Mr Amir, who owes RM800, has become bankrupt and cannot pay. Entry: Debit Bad Debts RM800, Credit Debtor (Accounts Receivable) RM800.
Source: DSKP KSSM Prinsip Perakaunan Tingkatan 4