Accounting for debtors accounts receivable
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Accounting for Debtors (Accounts Receivable). Credit control Estimating bad debts Provision for doubtful debts Writing off Bad debts. What are receivables?. Receivables (Debtors) Amounts due to firm from other businesses or persons

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Accounting for Debtors (Accounts Receivable)

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Accounting for debtors accounts receivable

Accounting for Debtors (Accounts Receivable)

Credit control

Estimating bad debts

Provision for doubtful debts

Writing off Bad debts


What are receivables

What are receivables?

  • Receivables (Debtors)

    • Amounts due to firm from other businesses or persons

    • Accounts receivables (amounts owing to the business for goods and /or supplied by the firm on credit). Also called trade debtors.

    • Other receivables


Credit control

Credit control

  • Procedures and measures taken the business to:

    • Minimise the risk of losses due to bad debts

    • To recover outstanding debts


Control over accounts receivable

Control over accounts receivable

  • Procedure on Credit approval

    • Investigate customer credit worthiness

    • establish credit policy (minimum requirement before credit is granted, number of days for debtors to pay, discount to be given, amount of interest on overdue accounts)

  • Adequate record

    • Use of control accounts and subsidiary ledgers


Control over accounts receivable1

Control over accounts receivable

  • Billing

    • Invoice as the document that certifies a credit sale has taken place

    • Credit note: sales return or allowance given

    • Statements of accounts should be send at regular intervals

  • Monitoring of accounts receivable to ensure that debt are paid on time

    • Aging of accounts receivable

  • Separation of duties


Accounting for debtors accounts receivable

Baker’s Trading

Aging of Accounts Receivable

As at 30 September 2005


Allowance for doubtful debts

Allowance for Doubtful debts

  • Application of prudence and matching concepts

  • Journal entry:

    • Dr Bad Debts Expense XXX

    • Cr Allowance for Doubtful Debts XXX


Writing off bad debts

Writing off Bad debts

  • Situations

    (1) Direct write off method/no allowance for doubtful debts

    • Adequate allowance for Doubtful debts

    • Inadequate allowance for Doubtful debts


Writing off bad debts direct

Writing off bad debts (direct


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