how to correct a Notification has been received that the outstanding balance on one of the debtors should be written off as the debtor is insolvent.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
how to correct a Notification has been received that the
outstanding balance on one of the debtors should be written off as the debtor is insolvent.
Introduction:
Rectification entry has to be passed when any error has been made in the books of accounts and cannot be corrected through erasure of the entry.
Different types of errors can be classified as following:
Errors of omission: this error occurs when any transaction has been either partially or fully omitted from records in the books.
Errors of commission: this occurs when a transaction has been recorded incorrectly either partially or wholly.
Errors of principle: when a transaction is recorded in a manner which is against the fundamental principles if accounting, it is called errors of principle.
Compensating error: when the amount of two or more errors are counterbalanced by each other, it is called compensating errors.
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