Irrecoverable debts

Irrecoverable debts are customer balances written off as an expense because collection is no longer expected, distinct from the allowance held for balances that are merely doubtful.

ByHoang TruongUpdated July 11, 2026

FrameworkIFRS 9

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Gross trade receivables of €45,000 include €2,000 owed by a customer now in liquidation with no prospect of payment. Writing off that specific balance debits irrecoverable debts expense €2,000 and credits receivables €2,000, leaving net receivables of €45,000 − €2,000 = €43,000. The separate allowance for doubtful debts covers balances that are merely uncertain, not yet confirmed lost.

Where it fits

SubjectFinancial AccountingCoreTopicRevenue, Expenses & ProfitCoreTopicWorking Capital & Trade AccountsCore

The formula

LaTeX

R_{net} = R_{gross} - D_{irr}

Variables

$R_{n e t}$: Net trade receivables (€)
$R_{g r oss}$: Gross trade receivables (€)
$D_{i r r}$: Irrecoverable debts written off (€)

How writing off a specific irrecoverable debt reduces the receivables balance carried on the balance sheet.

Check yourself

PracticeCORE

A company has gross trade receivables of €60,000. During the year it writes off €3,500 owed by an insolvent customer as an irrecoverable debt, and separately holds an allowance for doubtful debts of €1,200 against the remaining balances. What is the irrecoverable debts expense for the year?

Select an answer to check your understanding.