Question

New bad debt is deducted from ______.

• A. Old bad debts account
• B. Creditors account
• C. Debtors account
• D. Profit & loss account

Answer 1

Answer: (C)

Bad debts refer to the amount that the firm has not been able to realize from its 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

If the amount of bad debts is given outside the trial balance, by way of adjustment, such bad debts are known as further bad debts. It means the amount of sundry debtors in the trial balance is prior to the amount of bad debts and given as an adjustment. New bad debts are deducted from debtors account.