Dear All
I Have in a minor accounting problem
1 - bad debts are aseet, not liability why ?
2 - when bad debts is recover after 3-4 years when what is the entry and accounting of the same ?
3- NPA Tereatment After 3 Years ( when the bank has declared loss asset and, after 3 years, some recovery from the loss assets as on this time what is the treatment of the this NPA )
Kindly Suggest Me
Ankit Kumar Yadav
1) Dear Ankit, Bad debts are not at all assets....infact, they are expense.
The entry for bad debts(in respect of which no provision was made earlier) is:
Bad Debts(P&L) A/c Dr.
To Debtors(B/S)
2) When the amount is recovered from bad debts, then following entry is passed:
Bank A/c(B/S) Dr.
To Bad debts recovered(P&L) A/c
Dear
If the Bad Debts recovered it can be treated as Misc Income & shown as Indirect Income in P & L since Profit is going to be added & Tax computation will also involved.
The main reason is if Income Tax scrutiniy come after receipts it will be easy for explanation.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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