Closing Irrecoverable Debts to Income Statement

Steps:

• Recognize irrecoverable debts as an expense by debiting irrecoverable debts account and crediting trade receivables.
• At year-end, transfer the expense balance to the income statement for profit calculation.
• Debit the income statement to record the expense impact on profit.
• Credit irrecoverable debts to close the temporary account to zero.

Why A is correct:

• Irrecoverable debts is a nominal expense account; closing it requires crediting the account and debiting the income statement per double-entry accounting principles to reflect the expense in financial results.

Why the others are wrong:

• B reverses the entry, incorrectly crediting income statement and treating expense as income.
• C closes irrecoverable debts against trade receivables, which adjusts assets but not the expense.
• D writes off debts directly from receivables without recognizing the expense in income statement.

Final answer: A