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  Bad debts and Provision for Bad debts  Bad Debts When the firm finds that it is impossible to collect a debt, that debt should be written off as a bad debt.  Accounting Entries: Dr Bad Debts Cr Debtor With the irrecoverable amount of a debt  Example During the year, a company sold goods for $2,000 to Mr. Lee, $1,500 to Mr.Wong and $300 to Mr. Wu. Mr. Lee and Mr. Wong paid the company $800 and $1,000 respectively Later, Mr. Wong and Mr. Wu became bankrupt, and it is impossible for the company to collect these debts. The company decided to write these off as bad debts.  Mr. Lee $ $ Bank 800 Mr. Wong $ $ Sales 1,500 Bank 1,000 Sales 2,000 2,000 2,000 Balance c/f 1,200 Bad Debts 500 Mr. Wu $ $ Sales 300 Bad Debts 300 Bad Debts $   $ Mr. Wong 500 Mr. Wu 300 P/L   800 800 800 1,500 1,500
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