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How do you account for an irrecoverable (bad) debt in the sales ledger? 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?
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How is VAT bad-debt relief handled when writing off a receivable?

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Answer

If output VAT was paid on a sale that becomes a bad debt (after a qualifying period), the business can reclaim the VAT element. On write-off, debit bad debts expense for the net and debit the VAT account for the reclaimable VAT, crediting the customer for the gross. Rules on timing and conditions vary by jurisdiction.
Write off 1,200 gross (1,000 + 200 VAT): Dr Bad Debts 1,000; Dr VAT 200; Cr Debtor 1,200.
Real-world example On writing off an old debt, the business reclaims the VAT it had already paid on the sale.

Common follow-ups: When can VAT relief be claimed? | How is the gross split on write-off?

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All 25 Sales & Purchase Ledgers questions