When a business is being conducted on a general note, the financial issues are taken on an annual level. In such a scenario, the issue of bad debts is also presented on an annual level and therefore, only after a certain period of time can it be stated that the debt was a bad one.

When a journal dealing with such bad debts is presented as in the above mentioned case, it so happens that bad debt account gets debited and monetary values are to be transferred to debit column of profit and loss account.

If that concerned item belongs to adjustment, it will have to be shown on another side such as the assets side in a Balance Sheet. On that side, it is deducted from debtors column.

In case it is an item of bad debts when considered as per rules of Trial Balance it will be added to debit side of profit and loss account.


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