17 June 2022 20:40

How does writing off a bad debt affect the balance sheet?

Write Down. When debts are written off, they are removed as assets from the balance sheet because the company does not expect to recover payment. In contrast, when a bad debt is written down, some of the bad debt value remains as an asset because the company expects to recover it.

How do you treat bad debts written off in profit and loss account?

Bad debts being an expense are recorded under operating expenses in the income statement or on the debit side of the Profit and loss a/c.
1. Treatment of bad debts before preparation of trial balance.

Bad debts a/c Debit
To Sundry debtors a/c Credit