How to deal with bad debts for many years, and how to deal with bad debts

Multi-year bad debts can be solved in two steps:

The first step is to make provision for bad debts.

The method of making provision for bad debts is determined by the enterprise itself. The enterprise shall make a list of catalogues, specifying the scope of provision for bad debts, the method of withdrawal, the division of aging and the proportion of withdrawal, and shall be approved by the general meeting of shareholders or the board of directors, or the meeting of managers (factory directors) or similar institutions in accordance with the management authority, and shall be reported to the relevant parties for the record in accordance with the provisions of laws and administrative regulations, and shall be placed at the location of the company for investors' reference. Once the method of drawing bad debt provision is determined, it shall not be changed at will.

If there is a need for change, it should still be submitted to the relevant parties for the record after approval in accordance with the above procedures, and explained in the notes to the accounting statements.

The second step is to confirm the bad debts and write off the bad debts.

The new "Accounting System for Business Enterprises" stipulates that enterprises can only use the allowance method to account for bad debt losses, that is, enterprises should first estimate the bad debt losses on time to include them in asset impairment losses, form bad debt provisions, and make the balance of bad debt provisions at the end of each period reasonably reflect the risk level faced by the collection of receivables, when a receivable is recognized as bad debts in whole or in part, and then write off the bad debt provisions according to the amount of losses, and at the same time write off the corresponding amount of receivables.

For the receivables that cannot be recovered, they will be treated as bad debts after being approved by the management authority, and the receivables will be resold and borrowed: management expenses - bad debt losses Credit: accounts receivable - an enterprise.

The treatment of bad debt losses is subject to the approval of the tax authorities after the tax agent firm conducts the verification, otherwise the pre-tax deduction is not allowed.

The Measures for Pre-tax Deduction of Enterprise Income Tax clearly stipulates that "taxpayers who have been approved to withdraw bad debt reserves, unless otherwise specified, the proportion of bad debt reserves shall not exceed 5 of the balance of accounts receivable at the end of the year." ”

1. The direct resale method will incur bad debt losses.

It is directly included in the profit or loss for the current period.

Simple and straightforward. However, it does not combine the bad debt losses incurred in the various accounting periods with the accounts receivable.

It affects the correct ratio of income and expenses, and does not include the principle of robustness of accounting. This method is suitable for enterprises with less commercial credit, bad debts and low risk of loss.

2. The allowance method refers to the estimated bad debt losses that may be incurred by the enterprise on a regular basis, and includes them in the current expenses to form the bad debt provision of the enterprise.

When the actual bad debt loss occurs, the bad debt provision and the treatment of accounts receivable are reversed. There are three methods of making provision for bad debts: the accounts receivable balance percentage method, the aging analysis method and the sales percentage ratio method.

The accounts receivable balance percentage method is usually used. This method is suitable for enterprises with large credit amounts, high proportion of bad debts, and large amounts, which is more in line with the principle of robustness.

The above are the two accounting methods for bad debts.

There are two ways to deal with bad debts: the direct transfer method and the allowance method for bad debt losses.

1. The direct transfer method refers to the bad debt loss treatment method in which the loss caused by the bad debt is directly included in the asset impairment loss when the bad debt has been recognized. This method is applicable to businesses where the amount of bad debt loss is not large and the impact on the current profit or loss is small. Under normal circumstances, enterprises with small amounts of accounts receivable and a small number will use the direct resale method to deal with the losses caused by bad debts.

2. The provision method for bad debt losses refers to the provision for bad debts in accordance with the corresponding provisions on the date of the formation of accounts receivable. When bad debts occur, they only need to be offset from the provision for bad debts. The allowance method has a wide range of applications and can be used by most enterprises with accounts receivable.

Introduction to Bad Debts:

Bad debts refer to receivables that are not recovered by the enterprise or have a very small chance of being recovered. The loss due to the occurrence of bad debts is called bad debt loss. Due to the great uncertainty of the market economy, the accounts receivable of the enterprise may not be fully recovered, that is, some or all of the bad debts may occur.

The so-called bad debts refer to accounts receivable that cannot be recovered.

It is generally believed that if the debtor dies or goes bankrupt, the part that cannot be recovered after the repayment of the debtor's remaining property or estate; Accounts receivable that have been in arrears for more than three years can be recognized as non-bad debts of the carrier. There are two different ways to deal with the bad debts that may occur: that is, the bad debts that are not usually possible are estimated, and the accounts receivable are directly written off when the bad accounts are actually incurred (according to the current accounting system in China, this accounting method has been cancelled).

The accounting treatment of bad debts is as follows:1) Provision for bad debts:

Debit: credit impairment loss - provision for bad debts;

Credit: provision for bad debts.

2) In the event of bad debts:

Debit: provision for bad debts;

Credit: accounts receivable, etc.

3) Recover the confirmed bad debts and resell the receivables (the bad debts come back):

Step 1: Reverse bad debts.

Debit: accounts receivable, etc.;

Credit: provision for bad debts.

Step 2: Collect the debt.

Borrow: bank deposit;

Credit: accounts receivable, etc.

The enterprise should assess the carrying amount of the receivables at the balance sheet date, and if the receivables are impaired, the amount of the write-down should be recognized as an impairment loss, and provision for bad debts should be made at the same time.

Due to the great uncertainty of the market economy, the accounts receivable of the enterprise are likely to not be fully recovered, that is, some or all of the bad debts may occur. The so-called bad debts refer to accounts receivable that cannot be recovered. It is generally believed that if the debtor dies or goes bankrupt, Senzecha will use his remaining property and estate to pay off the part that is still unrecoverable; Accounts receivable that have been in arrears for more than three years can be recognized as bad debts.

There are two different accounting treatment methods for possible bad debts: that is, they do not estimate the possible bad debts, but only directly write off the accounts receivable when the bad debts actually occur (according to China's current accounting system, this accounting method has been abolished).

How to deal with bad debts is as follows:

First, the direct reversal method.

1. Under the direct write-off method, only when there is actually bad debts, that is, when the enterprise determines that a certain accounts receivable cannot be recovered, will the bad debts be written off.

2. The accounting treatment of the direct recitation method includes the following two steps: if an enterprise has bad debts, the accounting treatment is as follows: borrowing

Bad debt charges. Credit: Accounts receivable; If the bad debts after the reversal are later recovered, the accounting treatment is as follows:

Borrow: Cash. Credit:

Revenue. Second, the allowance method.

1. Under the Youxun allowance method, the enterprise estimates the expected non-** amount according to the amount of all credit sales or all outstanding accounts receivable. The net realizable value of accounts receivable is calculated by deducting the provision for bad debts on the basis of the total accounts receivable. The allowance method conforms to the principle of proportionality, which can objectively reflect the fact that the current bad debt expense is the balance of accounts receivable or the corresponding proportion of income, and ensures the reliability of financial statements.

3. The accounting treatment of the allowance method is divided into three steps: when it is expected that an enterprise may have bad debts, the provision for bad debts is made, and the accounting treatment is as follows: borrow:

Bad debt charges. Credit: provision for bad debts. When the accounts receivable of the enterprise cannot be recovered, the bad debt provision will be reversed, and the accounting treatment is as follows:

Debit: provision for bad debts; Credit:

accounts receivable; If the bad debts after the reversal are later recovered, the accounting treatment is as follows: debit: accounts receivable.

Credit: provision for bad debts. Borrow:

Cash. Credit: Accounts receivable.

Bad Debt Treatment:

1. Direct resale. The direct transfer method refers to the direct debit of "asset impairment loss" when the bad debt loss actually occurs.

Bad debt loss account, credited with accounts receivable.

Subjects. This method of accounting is simple and does not require setting up a "bad debt provision."

Subjects. Regarding the direct resale law, we should also grasp the following two important points:

First, the law is not in line with accrual accounting.

and the principle of proportioning;

Second, under this law, if the accounts receivable that have been written off are later recovered, two accounting entries should be made.

That is, the "accounts receivable" account is debited first, and the "asset impairment loss and bad debt loss" account is credited; The "Bank Deposit Search" account is then debited and the "Accounts Receivable" account is credited.

2. Allowance method. The allowance method refers to estimating the loss according to the accrual principle before the actual occurrence of the bad debt loss, and at the same time forming a bad debt provision, and then writing off the bad debt provision when the bad debt loss actually occurs.

When estimating bad debt losses, the "Asset Impairment Loss - Provision for Bad Debts" account is debited and the "Bad Debt Provision" account is credited. When a bad debt loss actually occurs (i.e., one of the three conditions mentioned above is met), the "Bad Debt Provision" account is debited and the "Accounts Receivable" account is credited.

When the receivables that have been recognized and resold are later recovered, the "Accounts Receivable" is debited and the "Bad Debt Provision" account is credited, and at the same time, the "Bank Deposits" account is debited and the "Accounts Receivable" is credited.

As for how to estimate bad debt losses, there are three methods to choose from, namely the year-end balance percentage method, the aging analysis method and the percentage sales method. When applying the year-end balance percentage method, the provision for bad debts (i.e., the estimation of bad debt losses) is divided into two situations: the first provision and the subsequent year's provision. When the provision for bad debts is made for the first time, the amount of bad debts is withdrawn, the balance of accounts receivable at the end of the year, and the proportion of provision.

General Principles of Corporate Finance

Article 24: Enterprises shall establish a financial review system for contracts and clarify business processes.

and approval authority, the implementation of financial monitoring. Enterprises should strengthen the management of receivables and assess the credit risk of customers.

Track customer performance, implement debt collection responsibilities, and reduce bad debt losses.

According to the relevant regulations of China, if the accounts receivable of an enterprise meet one of the following conditions, it should be considered as a bad debt: Due to the death of the debtor, it is still unrecoverable after the settlement of its estate; Because the debtor is bankrupt, it is still unable to recover it after being repaid by its bankruptcy estate; The debtor has not fulfilled its debt repayment obligations for a longer period of time (e.g. more than 3 years) and there is sufficient evidence that it cannot be recovered or the likelihood of recovery is extremely small.

Enterprises should conduct a comprehensive inspection of the receivables on a regular basis or at least at the end of each year, and make provision for bad debts that may occur in anticipation of the receivables receivables, and for the receivables that are not sure to be recovered, provision for bad debts should be made.

First, the text. Enterprises should conduct a comprehensive inspection of the receivables on a regular basis or at least at the end of each year, anticipate the possible bad debts of the receivables, and make provision for bad debts for the receivables that are quietly sold and are not sure to be recovered. Enterprises can only use the allowance method to account for bad debt losses.

2. Analysis. When determining the proportion of provision for bad debts, an enterprise should make a reasonable estimate based on the previous experience of the enterprise, the actual financial position and cash flow of the debtor, and other relevant information. Unless there is conclusive evidence that the receivables cannot be recovered, or the possibility of recovery is unlikely, the receivables incurred in the current year, the planned restructuring of the receivables, the receivables incurred with related parties, and other receivables that are overdue but have no conclusive evidence to prove that they cannot be recovered generally cannot be fully provisioned for bad debts.

3. What is the teasing of bad debts?

1. Due to the death of the debtor, it is still unrecoverable after the debtor's estate is repaid;

2. Due to the bankruptcy of the debtor, it is still unrecoverable after the bankruptcy property is repaid;

3. The debtor has failed to perform its debt repayment obligations for a long period of time, and there is sufficient evidence to show that it cannot be recovered or the possibility of recovery is extremely small.