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					                            Introduction to Bookkeeping and Sage Line 50
                            Module 2 – Accounting for bad debts

Step   Action

1      Your company ‘Stationery & Computer Mart UK’ has now incurred many accounts transactions,
       which you have dealt with in previous exercises.
       You have been informed that it is company policy that all debts over six months old are
       automatically written off as Bad Debts. In this exercise you will deal with writing off Bad Debts
       using Sage Line 50 and account for the VAT using journals.

2      Open your Sage application.
       From the File menu, choose Restore.
       Restore the backup file 9-SAGEBACK.001 which you downloaded along with this exercise.
       Print out the bad debts documentation. This is available from step 2 of the online exercise. You
       will be asked to refer to specific sections of the printed document as you work through the exercise.
       Close the document and then continue this exercise.

3      It is now July 2004. You need to show all debts that are over six months old and therefore need to
       run an Aged Debtors report for the month of January 2004.
       Click onto the Customers icon in Sage and select Reports to run the Aged Debtors Analysis
       (Summary) report for January 2004 by entering 31/01/04 in the Report Date field.
       For the purpose of this exercise you do not need to tick the Exc. Later payment box.

4      Identify the Customers and amounts to be written off by completing the following fields:


        Customer                                           £




       Make a note of the customer names as you will need them again in Step 6.

5      These debtors now need to be written off in Sage. Before you do this you need to establish the
       effects this will have on the Profit and Loss and Balance sheet.
       Print preview both reports for July 2004 through the Financials icon in Sage, and record the stated
       balances from each report in the fields below:


        Net Profit/(Loss)

        Debtors

6      Ensure you close all open windows when you have completed your task.




                                                    1
                             Introduction to Bookkeeping and Sage Line 50
                             Module 2 – Accounting for bad debts

Step    Action

7       Now select the Write off, Refund, Return option from the Tools menu and process the Bad Debts
        for the period ending 31/07/04. Note you need to process each bad debt separately.
        You need to tick Write off Customers Accounts when you are going through the write off, refunds
        and returns wizard. There is no need then to select individual amounts as the whole account is to
        be written off. Once you select the required customer click Next to continue until you need to input
        the date. Then select Finish.

8       Now print preview both the Profit and Loss and the Balance Sheet reports for July 2004 through the
        Financials icon in Sage. Note the following balances to see the effect this process has had on the
        accounts:

         Net Profit/(Loss)
         Debtors


9       As you are aware this function does not deal with the VAT that is involved and you therefore need
        to post a journal to do this.
        Ensure you close all open windows when you have completed your task.


10      Before you process the transactions check the status of the Nominal accounts that will be effected:


         2200
         8100


11      Select the Nominal icon and then select Journals.
        Now refer to the journal on page 1 of your printed document and post the journal on Sage.


Handy   The explanation for the bad debt is for your information only and does not need inputting on the
Hint    system.
        All entries can be posted at the same time.

12      Refer to Worked Example 1 on Page 1 of your printed document and check you have entered all
        the details before you click Save and Close.


13      You have now been advised that the following customer has gone into Liquidation and therefore
        the account needs to be written off to bad debts:
        Hausser GMBH
        Now process this bad debt through Sage for the period ending 31/07/04.

Handy   Use Tools, Write Offs, Refunds and Returns on Sage.
Hint



                                                      2
                            Introduction to Bookkeeping and Sage Line 50
                            Module 2 – Accounting for bad debts

Step   Action

14     Finally, check the status of the following Nominal Accounts to see how they have been effected and
       record the new balances in the fields below:


        1100 Debtors Control Account

        8100 Bad Debt Write Off



15     Well done. You have completed the Accounting for Bad Debts exercise.
       You have identified how to write off different bad debts that have arisen for different reasons. You
       have established how these bad debts have affected the profit & loss and balance sheet accounts.
       You have also made the necessary adjustment using journal entries to account for the VAT on bad
       debts and shown how the nominal accounts are affected.
       If you did not answer all the questions correctly, you may like to run this exercise again. Please
       start again at step2.
       If you wish to return to your learning, please close this exercise down and return to your course.


Answer Sheet


Step   Answer

4      Identify the Customers and amounts to be written off by completing the following fields:

        Customer                           £

        Fred Briant                        £1204.57

        Edward Stuart                      £1770.15



5      These debtors now need to be written off in Sage. Before you do this you need to establish the
       effects this will have on the Profit and Loss and Balance sheet.

       Print preview both reports for July 2004 through the Financials icon in Sage, and note the following
       balances:

        Net Profit/(Loss)      £47,774.07

        Debtors                £52,829.75




                                                    3
                            Introduction to Bookkeeping and Sage Line 50
                            Module 2 – Accounting for bad debts

Step   Answer

8      Now print preview both the Profit and Loss and the Balance Sheet reports for July 2004 through the
       Financials icon in Sage. Note the following balances to see the effect this process has had on the
       accounts:

        Net Profit/(Loss)      £44,799.35

        Debtors                £49,855.03


10     Before you process the transactions check the status of the Nominal accounts that will be effected:

        2200      £17,987.21
        8100      £2,974.73



14     Finally, check the status of the following Nominal Accounts to see how they have been effected and
       record the new balances in the fields below:

        1100 Debtors Control Account              £45,788.25
        8100 Bad Debt Write Off                   £5,237.93




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