Originally Posted by
dream111
u mean : no need to add" bad debt expenses 12" in P&L satement ? and also no need to subtract " allowance for doubtful debts12" in the Balance sheet?
You seem to not be getting the idea of what doing an entry means. An entry has equal debits & credits. The ENTRY has the equal debits & credits. That is not the same thing as an
entry having one debit and a
balance in another account having a credit in it. But that's what you're trying to do.
Entry:
Dr. Cash 1000
Cr. Acct Receivable 1000
Cash:
5000 balance in the account
prior to the entry
1000 ADD the debit from the above entry
6000 balance in the account
after posting the entry
Acct Receivable:
9000 balance in the account
prior to the entry
(1000) SUBTRACT the credit from the above entry
8000 balance in the account
after posting the entry
The entries are purple. Notice the entry has equal debits & credits. The balances are green. Notice everything else is just balances in the accounts. Those number are not relevant to the entry and have nothing to do with it. The
entry changes those balances to new balances. Balances and entries are not the same thing. You don't put balances into entries, and they can't change without making an entry. Entries
change balances.
Here is what you did:
Dr. Bad Debt Expense 12
NO CREDIT
Bad Debt Expense:
0 balance in the account
prior to the entry
12 ADD the debit from the above entry
12 balance in the account
after posting the entry
Allowance:
12 balance in the account
prior to the entry
No entry cause you didn't do anything to it
12 balance in the account which is the same cause you didn't make an entry to it to change it.
You simply stuck the same 12 that already existed in the allowance account and put it in bad debt expense. But you seem to think that another account already having a prior credit balance of 12 in it is good enough. But note the
entry has no credit.
I hope this illustration shows the difference between how balance and entries properly work, and what it is you did.
This is one reason you're out of balance. That entry that put 12 in bad debt expense doesn't have a credit in it.
The credit that already exists in allowance is not in the entry. It simply already existed.
Now that said...
Sticking anything at all into bad debt expense should not have happened. In other words, this should never have happened to begin with:
Dr. Bad Debt Expense 12
NO CREDIT
The problem very explicitly says that no entry is needed. Please start reading more carefully. Not only is the problem coming right out and saying no entry is needed, but I've repeated it numerous times. That one-sided 'entry' up there with the bad debt expense
should never have existed to begin with, cause the problem said don't do it.