Account entry for bad debts relief and recovered, which method is correct:

Sales of good to debtor amount of RM3,180 inclusive GST.

Method 1: After 6 months later and never receive any payment from customer:
Dr Bad Debt (Exp)  3,000
Dr Input Tax                   180
Cr Debtor                                   3180

When received the payment from Customer after the tax adjustment:
Dr Bank       3,180
Cr Bad Debt Recovered (income)       3,000
Cr Output Tax                                                     180

Method 2:

After 6 months later and never receive any payment from customer:
Dr Bad Debt (Exp)   180
Cr GST Liability (B/S)                          180

When received the payment from Customer after the tax adjustment:
First entry,
Dr Bank                3,180
Cr  Debtor , and                  3,180

Second entry,
Dr GST Liability (B/S)                180
Cr  Bad Debt Recovered (income)               180

Asked on September 8, 2015 2015-09-08 15:54:40 Business (商家)
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3 Answer(s)

I think Method 1 is more appropriate.

Answered on September 17, 2015. 2015-09-17 08:20:32
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What is the tax code for method 1 ?

Answered on April 25, 2016. 2016-04-25 04:39:45
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After 6 months later and never receive any payment from customer:
Dr Bad Debt (Exp)  3,000  –  AJP
Dr Input Tax                   180  –  TX
Cr Debtor                                   3180  –  OP

When received the payment from Customer after the tax adjustment:
Dr Bank       3,180  –  OP
Cr Bad Debt Recovered (income)       3,000  –  AJS
Cr Output Tax                                                     180  –  SR

Method 2:

Answered on April 25, 2016. 2016-04-25 05:30:03
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