What is The Difference Between Bad Debts And Bad Debts Written Off

Bad Debts And Bad Debts Written Off

Estimated Bad Debts Expense Or Doubtful Debts or Uncollectible Accounts Expense is your estimated value based on the percentage of either Sales or closing balance of Accounts Receivable (Debtors) that such percentage of sales or accounts receivable may or may not be recovered from the customers. Bad Debts is your actual expense or loss as it is certain that it will not be collected from customers for sales made so there is a need to write off such bad debt to get updated value of accounts receivable and as a result  Bad Debts Written Off are recorded in Income Statement and deducted from Accounts Receivable / Debtors on balance sheet.

  

Estimated Bad debts expense journal entry is made by debited to bad debts expenses (Doubtful Debts) account and credited to Allowance for Doubtful Accounts / Provision for Doubtful Accounts while the entry for actual bad debts expense that needs to be written off is recorded by debited to bad debts written off and credited to accounts receivable account.

Bad debts expense is uncertain amount as it is not clear which percentage of sales or accounts receivable will not be collected from customers while bad debts written off is certain amount as it is clear that the customers fail to pay such uncollectible amounts (e.g. Rs. 500000) on due date.