What is Bed Debts in Tally Accounting
What is bed debts. Bed debts are one type of Expenses of a business, then the business owner has to bear it. If the owner of the business sold an item to a person on credit, then that person is called a debtor for the business. But if money is not given by the person in lieu of sales, then it is called bed debts in the language of accounting. Meaning that the income which was about to be received by the businessman in lieu of sales but could not be received, such loss is called bed debts.
Understanding Bad Debt in Tally Accounting
If we talk about bed debts in simple words, then it is a type of bad debt. Who has given credit to a customer but now that loan cannot be expected to come back. When a businessman gives a sale to his customer on credit, then that customer is called a debtor for the businessman. But it is not necessary that in the coming days, the debtor should pay that loan on time. Many times it happens that the status of your debtor changes and he is not able to pay on time. Simply put, bed debts are such expenses that a customer never gets a loan against the goods lent to him.
How to Recorded Bad Debts in Tally Accounting
In accounting, you can enter or enter bad debts in two ways.
1. Bad Debt Write off
2. Bad Debt Provision Methods
Understating Bad Debt Write-off Method Explained
When these methods come in handy, then you know in writing that how much debt is on a person and it can never be returned. So to eliminate this bad debt, the accountant will have to make an entry in his book in which he will debit the bad debt and credit the person on whom the debt is.
Understanding Bad Debt Provision Methods
This method is related to accounting, in which it is not known how much bad debt actually is. When you add this account in your books, then you have to get the approximate figure for the whole year. And when you get the estimated figure, then equalize the account of the person concerned.
What Reasons of Bed Debts Happens in a Business
When a business starts, it becomes difficult for the businessman to predict who should give loan and who should not. When the businessman gives the loan, the debtor is in the right position at that time, but due to some reason the borrower is unable to give his loan, then the businessman has to bear the loss. There are some people who intentionally take a loan but do not pay it back later. The businessman slowly takes a good look at his experience before giving loan to anyone. If it is happening to the businessman that the debtor is not returning his loan, then the businessman should give the loan thoughtfully, due to which there is a possibility of getting the loan.
What is Bad Debt Example in Tally Accounting
When a businessman sells goods on loan of 150000/- to a person, then that person becomes sundry debtors for the businessman. And the Liability of that debtor becomes that the businessman’s loan of 150000 / should be repaid on time. But for some reason the debtor of the businessman is not repaid by the debtor, then in that case the businessman puts 150000/ in the account of bad debts of the same year which is a kind of indirect expenses. And when the balance sheet of the businessman is finalized then it is shown as 150000/ bad debts.
But if that debtor gave 150000/ to the businessman next year, then that would be the indirect income for the businessman. Because the balance sheet of the previous year has been finalized. And if the debtor has given Rs 150000/- this year, then this businessman will have to enter in his book as indirect income.
How Bad Debts Entry in Tally Accounting
The entry of bad debt has to be done by the accountant in the journal voucher of Tally. Whose shortcut key is (F7). Whose complete information is given below.
1. Gateway of tally
2. Accounting Voucher
3. F7 (Journal voucher )
In this entry we debited the bad debt which was a kind of expenses for the businessman. and made the credit of the debtor. Because his 150000/- credits were coming, they should be equal.
Is Bad Debts An Asset or Liability
Bad debt is a type of expenses that the businessman has to bear. But when the businessman gives a loan of 10000/- to a person, then that person is a debtor to the businessman, which is a current asset for the businessman. which is to be received by him within the year. When we look at the balance sheet of the businessman, Rs 10000/- appears on the side of his assets. But if due to some reason the debtor does not give a loan of Rs 10000/ then 10000/ will be a kind of expense for the businessman. Not assets or liability.
Why important to understand bad debts
It is important for any businessman to explain the bad debts so that he does not repeat the same mistake again in the coming time. If he is a person of the type of bad debts, then he harms the business of the businessman. Because a bad loan can make your business look like something you don’t expect. A businessman should always stay away from bad loans. So that there is no loss in business.