Bad debts

1.inital sales entry

vendor a/c dr.............100000

   TO sales a/c.............100000

2. on receipt of part payment

  Bank/cash a/c dr...........80000

  TO vendor a/c

3. Entries on date of writitng bad debts

  A. vendor a/c dr..............(interest amount)

      TO interst earned............

  B.  Bad debts a/c dr................... (20000+interest amount)

       vendor a/c.............................

Another view can also be taken (actually used in business) where unearned interest is written off, then entry for 3B shall be

   Bad debts a/c dr.................. 20000

  interest earned a/c dr.............interst amount

   TO vendor a/c.........

HI Shivani,

The equired entries will be as under

In the books of A

On 1/4/15

B Dr. 100000

to Sales A/c 100000

On 24/4/15

Bank Dr. 80000

To B 80000

Bad Debts/Quality Deduction A/c Dr. 20000

To B 20000

In the books of B

On 1/4/15

Purchase Dr. 100000 

To A  100000

On 24/04/15

A Dr 80000

To bank 80000

A Dr 20000

to Sundry Bal W/off / Purchase A/c 20000

Note: Interest will not be recognise as Income since its ultimate collection is uncertain as per Accounting Standard - 9 Revenue Recognisation

Thank You...  

Hi mukesh and ambuj

thanks for ur reply

but both of u gave different answers

i dont know which one to follow

i m confused now

shivani