[Anonymous]

Dear all, please kindly help.

1. is bad debt deductible in taxable income? e.g, book net profit is 10000(including 3400 of bad debt expense, and bad debt expense written off is 2900), how much is taxable income?

2. if bad debt expense is written off in accounting book, does it impact deferred tax recognition, does it deductible in taxable income? e.g bad deb expense is 3400, bad debt is written off by 2900, how much is the deferred tax recognized if any?

[Anonymous]

For Taxable income, you only deduct bad debt written off, not the allowance for doubtful accounts or bad debt expense. so in your example, you would add back 500 to arrive at taxable income, since the bad debt written off is 500 less than the accrued expense.

Based on my answer for the first part, I believe it'd give you a deferred tax asset of 500 multiplied by your tax rate. This is based off of my study of REG, since I don't remember FAR using bad debt expense for deferred tax liabilities.

The journal entry, from what i remember, might be something like this. Assume tax rate is 25%

BOOK TAX DIFFERENCE FOR BAD DEBTS

Tax expense 2,500

Deferred tax asset 125

___________________Tax payable 2625

I get the numbers by multiplying by the tax rate

[Author]

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