Stuck with irrecoverable debt question. Please help.

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Freddyness
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Report Thread starter 4 weeks ago
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In the image I’ve included. In the irrecoverable debt journal do I write off the full amount including vat or not.
I feel like I’ve mixed the irrecoverable debt number and the customer account number.
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Egg Fried Rice
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Report 2 weeks ago
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The VAT will need reclaiming as it is likely that the company has already paid the VAT over to HMRC following the initial recognition of the sale. Now that the debt has been written off you can claim back the VAT paid.

The best way to think about this is to do the reverse of what you originally would have done when recognising the sale (to a certain extent). On the original sale the following would of happened:

Cr Income (net amount)
Cr VAT
Dr Customer Account/Trade Debtors

You will just need to do the above but in reverse, except instead of debiting income you should debit bad debt expense.
Last edited by Egg Fried Rice; 2 weeks ago
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