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An unclaimed liability of 2000 is to be written off where it to be shown in revolution account?
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An unclaimed liability of 2000 is to be written off where it to be sho...
Unclaimed Liability of 2000
Unclaimed liability refers to a liability that is outstanding for a long time, and the creditor has made no attempt to claim it. In such cases, the liability is deemed to be irrecoverable, and the business can write it off as an expense. Let's look at how to account for an unclaimed liability of 2000 in the revolution account.
Step 1: Create a Provision for Bad Debts Account
Before writing off any unclaimed liability, the business needs to create a provision for bad debts account. This account will be used to accumulate all the bad debts incurred by the business over time. The provision for bad debts account is a contra asset account, which means that it reduces the value of the accounts receivable account. The following journal entry is made to create the provision for bad debts account:
- Debit: Provision for Bad Debts Account - 2000
- Credit: Accounts Receivable Account - 2000
Step 2: Write Off the Unclaimed Liability
Once the provision for bad debts account is created, the business can write off the unclaimed liability as an expense. This is done by making the following journal entry:
- Debit: Bad Debts Expense Account - 2000
- Credit: Provision for Bad Debts Account - 2000
The bad debts expense account is an operating expense account, and it is used to record all the expenses incurred by the business due to bad debts. By writing off the unclaimed liability as an expense, the business reduces its taxable income, which lowers its tax liability.
Step 3: Record the Transaction in the Revolution Account
The revolution account is a summary account that shows the net effect of all the transactions in the business. To record the write-off of the unclaimed liability in the revolution account, the following entry is made:
- Debit: Bad Debts Expense Account - 2000
- Credit: Revolution Account - 2000
The revolution account is a capital account, and it is used to record all the transactions that affect the owner's equity of the business. By recording the write-off of the unclaimed liability in the revolution account, the business reduces its net worth, which reflects the loss incurred due to the unclaimed liability.
Community Answer
An unclaimed liability of 2000 is to be written off where it to be sho...
Usually inc in asset and dec in liability is written on the right side of the Revaluation A/c .
In this case the unrecorded/unclaimed liability is said to be written off which means that either it is already paid or the creditor does not ask for the payment anymore, so the liability is getting decreased .
Hence it will posted on the Right side of Revaluation A/c
In this case the unrecorded/unclaimed liability is said to be written off which means that either it is already paid or the creditor does not ask for the payment anymore, so the liability is getting decreased .
Hence it will posted on the Right side of Revaluation A/c
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An unclaimed liability of 2000 is to be written off where it to be shown in revolution account?
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An unclaimed liability of 2000 is to be written off where it to be shown in revolution account? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about An unclaimed liability of 2000 is to be written off where it to be shown in revolution account? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An unclaimed liability of 2000 is to be written off where it to be shown in revolution account?.
An unclaimed liability of 2000 is to be written off where it to be shown in revolution account? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about An unclaimed liability of 2000 is to be written off where it to be shown in revolution account? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An unclaimed liability of 2000 is to be written off where it to be shown in revolution account?.
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