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It is an estimated  bad debts  expense which is created by making an estimation based on the past experience of customers ( Accounts Receivable Aging Report ) that some percentage of Accounts Receivable may not be recovered from our customer. It is also called Doubtful Debt under British Accounting System. It is different from Actual Bad Debts Written Off in the way that it is just an estimated expense which may come true or not while Actual Bad Written Off is the expense which is actually suffered  by  the business in the accounting period i n which it is incurred Uncollectible Accounts Expense Journal Entry Considering the example of the Sales made to Customer (Mr. A) on 1st July, 2018 for Rs. 30000. Suppose, we make an estimation that 2% will not recovered from customer based on past experience with this customer. Then following Accounting Journal Entry is passed in the Book of our company:         Uncolle...

Accounting For Bad Debts Written Off Bad Debt Written off means that the amount of goods sold to customers or services rendered to them are actually not recovered from our customer ( Accounts Receivable ) within the time specified. It is a Loss or Expe nse  to the business and it is recorded i n  Bad Debts Expe nse T Account or Ledger and then closed by transferring to   Income Statement o n  Expense Side at the e nd of the Accounting Period .  B ad Debt Expense is considered as the actual loss to the Revenue from Uncollectible Accounts who failed to pay on time.   Bad Debts Expense is different from Uncollectible Accounts Expense as bad debts is actually the real loss to the the business while Uncollectible Account Expense is an estimated expense that will happen in future if the customer will fail to pay. Bad Debts Written Off  Accounting Journal Entry Suppose, Mr. A is our customer to whom we sold goods ...

It may possible that the amount of Bad Debts Written off (Actual Bad Debts) recovered from our old customer ( Accounts Receivable / Debtor ) who initially failed to pay the amount of unpaid dues in time. Such a recovery of debts amount from customer is called Bad Debt Recovery and the company makes an account with the name of Bad Debt Recovered Account in which such type of Business Transaction is recorded. You Can Also Read Out, “ Difference Between Uncollectible Accounts Expense VS Bad Debts Expense ” > A company adopting either Allowance Method or Direct Write-Off Method , the adjusting entry for Bad Debt Recover is the same. Example of Recovery of Bad Debts Previously Written Off For Example, if one of our customer (Mr. A) initially failed to pay unpaid dues on time for the goods sold Rs. 30000, but after some time, i.e., 2 years he / she is able to pay the amount, then the recovery of bad debt is recorded in the book or journal of c...

Owner’ Equity Or Simply Equity is the rights of Owner /Owners, Shareholders or Stockholders in any type or kind business whether it is Sole Proprietorship or Company or Corporatio ns. It is to be noted that Normal Balance or Favouable Balance For Equity is Credit Balance. However, The General Rule For Equity During Recording of Business Transactions is that when the Equity increases, we debit it and when it decreases, we credit it in the Book or Journal of the Business. For More Details, You Can Read Out This Valuable Article In Detail, “ What is the Difference Between Debit And Credit ” After considering the above rule of Debit And Credit for Equity, we can easily apply this rule in the followi n g example: Mr. A started Business with Cash Rs. 100000. This is a Business Transaction, So Pass following Accounting Journal Entry in the Book of Business:                     ...

We know that Expenses are the costs incurred to earn Revenue for the business while Revenue is the price of goods sold or services rendered by the business to its customers. I ncome is the Differe nce Betwee n Reve nues A nd Expe nses. For More Detail, You Can Read Out This Helpful Article, “ What is The Difference Between Net Income And Revenue ” Note: For Accounting Journal Entries, We assume here only Revenue as there is no difference between Income and Revenue when we pass journal entries for both of them because both have same rules of Debit And Credit. The Normal Balance for Expense is Debit while Unfavourable or Negative Balance is Credit while Revenues having Credit Balance as a Normal Balance or Favourable Balance but Debit Balance is Negative or Unfavourable Balance for Revenues. The General Rule of Debit And Credit for Expenses is that when expenses increase, we Debit these one and when these decrease we Credit these one. But F...

Previously, we already studied about, “ Journal Entries For Liabilities ” but, here we will study about Assets Accounting Journal Entries in the Book or Journal of the business of Company. Assets are resources of the business and these provide probable future economic benefits to the business. Asset are of two types: 1. Current Assets having one or less than one year life. Examples are Accounts Receivable , Cash , Inventory , Prepaid Rent , Accrued Revenue, Short-Term Investment, etc. Fixed Assets / Long Term Assets / Non Current Assets having life more tha n one year. These include Land & Buildings, Plant & Machinery, Furniture & Fixtures, Office Equipment like Mobile Phones Computers, Laptops, Chairs,etc, Long-Term Investments, etc. Before giving the example, you must understand the General Rule For Assets that is When Assets increases, we debit it and these decrease we credit it. However, the Normal or Favourable or Positive B...

Liabilities are the debts due payable by the business to outsiders, i.e., Suppliers, Bank, Financial Institutions, etc. There are two kinds of Liabilities: 1. Current Liabilities :- Examples include Accounts Payable / Creditors , Outstanding Salaries, Unearned Revenue, etc. and 2. Long-term Liabilities / Non Current Liabilities that include Bank Loans, Mortgage Loans, etc. If Your Are Interested In “ How To Enter Accounting Journal Entries For Assets ”, then you can Read it in order to get Information about this topic. The Accounting Journal Entries in respect of Current Liabilities and Non Current Liabilities are the same and the General Rule is that when Liabilities increase, we debit these one and when these decrease, we credit these one. Remember that, the Normal Balance or Favourable Balance of Liabilities is Credit and Unfavourable or Negative Balance is Debit. Now, let us consider an example in order to record Accounting Journal...