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Debtors

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MASHUMI

FINANCE MANAGER

32 Points Posted on 21 August 2012

I had raised debtors at year end @ 30 June 2011 for R1600 000 as a result of an audit adjustment during an audit ie Dr Debtor and Cr Revenue by R1600 000. There has been no movement to this debtor since last year and we know that it is uncollectable . What do I do for the 30 June 2012 year end.

Iam not sure if the following entries are relevant to clear this debtor account:

DR Retained Earnings R1600 000

CR Debtors R1600 000,

Thanks in advance

Replies (3)

CA. Subhash Dangi

Chartered Accountant

1440 Points Posted on 21 August 2012

If Debtors no longer receivable or recoverable, either (a) it may be written off as bad debt for the current FY or (b) entry may be reversed by debiting to revenue account.

However, for reversing the entry, point to be remembered in respect of to debiting revenue account this year for the transaction pertains to prior period. As per prudent and accounting standards, same should be mentioned as prior period items and disclosed seperateley in the financial statements.