Debt becoming bad and doubtful is a common occurrence in business. When a debt becomes bad and doubtful, it means that the debtor is unlikely to pay the debt in the future. In such a situation, the amount of the debt needs to be accounted for properly. The amount is credited to the debtor's account.

Explanation:

When a debt becomes bad and doubtful, the amount needs to be accounted for properly. The amount of the debt is credited to the debtor's account. This is done to reflect the fact that the debtor is unlikely to pay the debt in the future.

The following are the reasons why the amount is credited to the debtor's account:

1. To reflect the true financial position of the business:

When a debt becomes bad and doubtful, it is important to reflect the true financial position of the business. By crediting the amount to the debtor's account, the financial statements of the business will show the true position of the business.

2. To write off the debt:

When a debt becomes bad and doubtful, it is important to write off the debt. By crediting the amount to the debtor's account, the debt is written off and it is no longer considered an asset of the business.

3. To reduce the tax liability:

When a debt becomes bad and doubtful, it is important to reduce the tax liability of the business. By crediting the amount to the debtor's account, the business can claim a tax deduction for the bad debt.

Conclusion:

In conclusion, when a debt becomes bad and doubtful, the amount is credited to the debtor's account. This is done to reflect the true financial position of the business, write off the debt and reduce the tax liability of the business.