What is the difference between bad debt and doubtful debt?

What is the difference between bad debt and doubtful debt?

Bad debt (Bad Deb) is the failure to receive payment from the debtor who collects until the end. until it is written off from the account

Doubtful accounts are debtors who are unable to pay their debts in installments. Considered as the cost of that accounting period. but not expenses according to the Revenue Code

allowance for bad debts or allowance for doubtful accounts (Allowance for Doubtful Accounts) is to collect money in advance for protection and guarantee that The debtor is unable to pay the debt in the next installment. can be used as a deduction item from the accounts receivable on the balance sheet

There are two methods of accounting for bad debts as follows:

- Direct amortization method It's an easy way to save. Will record only when bad debts are incurred by bringing

Debit - Bad Debt XX

Credit - Debtor XX

- how to set an allowance can be calculated from the percentage of sales or calculated from the percentage of the outstanding balance If the debtor has the original balance be deducted from the calculated amount. or calculate to make the balance as close to the truth as possible by bringing

Debit - doubtful accounts XX

Credit - Allowance for Doubtful Accounts XX

In the event that the debtor fails to pay or unable to collect money from the debtor, bring

Debit - allowance for doubtful accounts XX

Credit - Debtor XX

Bad debt received is the payment system from debtors who have already written off bad debt, which can be divided into 2 cases as follows

Scenario 1: In case of actual bad debt write-off to create a new debtor, record it by bringing

Debit - Debtor XX

Credit - bad debt recovered XX

Debit - Cash XX

Credit - Debtor XX

Case 2 In the case of setting up an allowance for bad debts to create a new debtor and reduce the allowance for doubtful accounts can be recorded by bringing

Debit - Debtor XX

Credit - Allowance for Doubtful Accounts XX

Debit - Cash XX

Credit - Debtor XX

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