Irrecoverable debts
- Irrecoverable debt — money a business is unable to receive from a credit customer, which must be written off as a loss.
- Recovery of debts — payment received for a debt that had previously been written off as irrecoverable.
Provision for doubtful debts
A provision for doubtful debts:
- ensures profit is not overstated in the year;
- follows the prudence principle.