Make entries for irrecoverable debts including recovery of irrecoverable debts
An irrecoverable debt is money a customer owes but will never pay. Accountants remove it from the records and treat it as an expense.
Formula
Dr Irrecoverable Debts Expense / Cr Receivables (write-off); Dr Receivables / Cr Irrecoverable Debts Recovered (recovery)
Real World
When Carillion collapsed in 2018, thousands of supplier businesses had to write off the amounts Carillion owed them as irrecoverable debts, reducing their profit for that year.
Exam Focus
For a recovered debt, show two separate journal entries — reinstate the receivable first, then record the cash receipt.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
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