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How is an early-settlement discount received from a supplier recorded? How do you record goods taken by the owner from inventory (drawings in kind)? What is the difference between the memorandum ledger balance and the control account balance? How do you record interest charged to a slow-paying customer? How do you reconcile the sales ledger to the sales ledger control account? How do you handle a supplier statement reconciliation in the purchases ledger? How do you account for a provision (allowance) for doubtful debts affecting receivables? How is VAT bad-debt relief handled when writing off a receivable?
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How do you account for an irrecoverable (bad) debt in the sales ledger?

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Answer

When a customer's debt is deemed uncollectible, write it off: debit bad debts expense (and reverse the VAT if bad-debt relief applies) and credit the customer's account in the sales ledger to remove the receivable. This is recorded via the journal and reflected in the receivables control account.
Write off 400 bad debt:
  Dr Bad Debts Expense 400
      Cr Trade Receivables (customer) 400
Real-world example After a customer becomes insolvent, their outstanding balance is written off to bad debts expense.

Common follow-ups: Which account is debited on a write-off? | How is VAT bad-debt relief handled?

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All 25 Sales & Purchase Ledgers questions