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Irrecoverable Debts and Provision For Doubtful Debts
Irrecoverable Debts and Provision For Doubtful Debts
• For example, if a business ceases trading and the owner sells the
firm’s assets at some later date to pay off part of the debts to its
trade payables.
• The general journal entry necessary to write off a debt that is partially repaid
is as follows:
• Debit: cash if cash is received, or
• Debit: bank if cheque was received
and
• Debit: irrecoverable debts with unpaid portion
• Credit: the debtor/customer with the full amount outstanding.