13 May 2008
if you are sales some goods on credit & debtor is unable paying any amount to you then you will write off the amount as bad debds in your book & debited to P & L A/C if in future you will received any amount from debtors then it is trated as your income bad debts are allowed only on your business related if you are given some money to your sister as hand money & sister will not pay the money it is not allowed bad debds
14 May 2008
Bad debts in ordinary paralance denotes a debt, the recovery of which was/likely to be, not possible.
cosequences:
Income tax Act: If it is a business debt, relating to sale proceeds/income, it is allowable as expenditure for tax computation on being writen off in books.
Accounting Standard: Requires write off in the accounts relating to business or profession.
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