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It is just possible that debts may not be fully recovered from debtors. Certain amounts may prove to be bad. The irrecoverable amount is termed as bad debts. It is undoubtedly a loss, so posted at the debit side of profit and loss account. If bad debts are declared during the year the following journal entry will be passed:

Bad debts A/c                                                 Dr.

To Sundry Debtors A/c

The above journal entry reveals that the amount of sundry debtors has been reduced by amount of bad debts, so debtors in the balance sheet will be shown at their value mentioned in the Trial balance. Bad debts account will appear in the trial balance. It will show debit balance and be posted at the debit side of profit and loss account only.