What is the definition of creative command

31/12/2013 bad debts expense  800$

                                      Provision for bad debt expense    800$

                       Provision for bad debt    60$

                                                                Debter   60$

                        Provision for bad debt   75$

                                                          Debter   75$

                        Provision for bad debt  45$

                                                           Bad debt recovery income 45$

                        Provision for bad debt   100$

                                                        Debter  100$

                                Provision for bad debt  25$

                                                                Bad debt recovery income  25$

Answer:

Please find the answer below

Explanation:

Balance sheet approach to bad debts:

Using this approach means that when the company sells good or renders a service, it does so on credit. This means that clients receive goods or the service being rendered, but they pay at a later date. This is recorded under accounts receivable (an account to record all clients that purchased goods on credit). At certain times, some of the clients that purchased goods on credit fail to settle the debt on those goods. In such cases the company has to write off that amount as a bad debt expense so as to remove it, as it highly likely that it will not be recovered. The contra-account for bad debt is ‘allowance for bad debt’ which reduces the balance of accounts receivables. It gives the true reflection of the account receivables balance.

It does, however, that amounts that were previously written off as bad debts, are recovered. In that instance we have to reduce the allowance for bad debts and reverse the bad debt expense by recording an income called ‘bad debts recovered’.

Date  Account                  Dr          Cr

31/12/2010 Bad debt Expense       $800

  Allowance for bad debts                $800

Bad debt expense recorded

03/01/2011 Bad debts expense   $60

  Allowance for bad debts                  $60

Bad debt expense recorded

04/03/2011 Bad debts expense   $75

  Allowance for bad debts                  $75  

Bad debt expense recorded

05/07/2011 Allowance for bad debts  $45

  Bad debts recovered                  $45

Bad debts recovered recorded

19/08/2011 Bad debts expense        $100        Allowance for bad debts                                       $100

Bad debt expense recorded

07/11/2011  Allowance for bad debts   $25

  Bad debts recovered                $25

Recording bad debts recovered