The correct answer is option C: Debtors Account.

Explanation:

When a debtor fails to make a payment on time or defaults on their debt, it becomes a bad debt for the company. In accounting, bad debts are considered as losses for the company and need to be accounted for properly.

To account for bad debts, the company uses the allowance method. Under this method, a provision for bad debts is created by estimating the amount of bad debts that are likely to occur in the future. This provision is recorded as an expense in the profit and loss account and a corresponding amount is debited to the bad debts account.

The bad debts account is a nominal account and is classified as an expense. It is used to record the amount of debts that are considered uncollectible and are written off from the debtor's account. By debiting the bad debts account, the company recognizes the loss incurred due to non-payment by the debtor.

On the other hand, when a debtor fails to make a payment, their account remains outstanding in the books of the company. The outstanding amount is recorded as a receivable in the debtor's account. When the bad debt is confirmed, the debtor's account is credited with the amount of the bad debt. This reduces the outstanding balance of the debtor and reflects the loss incurred by the company.

Therefore, in case of bad debts, the debtor's account is credited, as it represents the reduction in the amount receivable from the debtor. This allows the company to accurately reflect the financial impact of the bad debt and adjust its accounts accordingly.