Bad debts in the Financial Statements
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Bad debts in the Financial Statements
The bad debts or irrecoverable debts are shown in the income statement or otherwise known as the profit and loss as an expense item. This is deducted from the gross profit value as the debt is irrecoverable and a loss of revenue. On the other hand, with the statement of financial position or also known as a balance sheet, the bad debt or irrecoverable debt will be subtracted from the trade receivables amount. The bad debt or irrecoverable debt is taken away from the trade receivables total so as a result this is what the business expects to actually receive of trade receivables.
