What is a bad debt? What is a bad debt? How to identify bad debts?

Bad debts are accounts receivable that cannot be recovered by a business.

It is a very normal phenomenon for enterprises to have bad debts and cause bad debt losses. According to the relevant regulations of China, if the accounts receivable of an enterprise meet one of the following conditions, it shall be recognized as bad debts: due to the death of the debtor, it is still unrecoverable after the debtor's estate is repaid; 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 very small.

Doubtful debts refer to uncollectible current accounts that have neither increased nor decreased for more than three years, and which cannot be determined whether they can be recovered in the future, should be determined as doubtful debts. It is reflected as an asset on the balance sheet of each year and is not subject to a provision for bad debts.

Bad debts are receivables that cannot be recovered or have little 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 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, 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 bad debts.

There are two different accounting methods for enterprises to deal with possible bad debts: that is, they do not usually 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).

Its accounting treatment is as follows: Debit: Management Expenses Bad Debt Loss Credit:

Accounts receivable The allowance method requires that the possible bad debts are estimated on an accrual basis at the end of each accounting period, and the following accounting entries are prepared: Debit: Administrative expenses Bad debt loss credit:

Provision for bad debts Provision for bad debts at the end of the period can also be made at the rate of a certain percentage of income from sales on credit. This method is consistent with the accounting treatment of accounts receivable balances, except that there are differences in the calculation of accrued amounts. Under this method, the amount of provision is such that the balance of the provision for bad debts after provision reaches a certain percentage of the income from sales on credit in the accounting period.

In this method, the provision for bad debts at the end of the period is not calculated according to a fixed ratio, but the accounts receivable are divided into different intervals according to the time of arrears, and the total amount of arrears in each period is calculated according to a proportion. Generally speaking, the longer the accounts receivable are in arrears, the greater the possibility of bad debts, so the proportion of bad debts should be higher. The amount of bad debts payable at the end of the accounting period is calculated according to the above tiered ratio, which is the difference between the amount and the balance of the original bad debt provision account.

Bad debts, dedicated to China's financial enterprises;

Bad debts must be judged in accordance with the provisions of the "Accounting System for Business Enterprises".

Be. Provision for bad debts.

Still is. Bad debt losses.

If it is a bad debt provision, it should be in.

Receivables. 1. Accrual starts in the 7th month after the occurrence (depending on your company.)

Financial system. If it is a bad debt loss, it cannot be recovered in 3 years to prove that there is little hope, so confirm the bad debt loss first, and once it is recovered, it can be.

Reversal. Bad debt losses.

An uncollectible account is a bad debt.

Bad debts are accounts receivable that have been determined to be uncollectible. Since it has been determined that the uncollectible accounts receivable cannot generate cash flow and no longer meet the definition of assets, they should be removed from the assets in a timely manner and disposed of as losses and expenses. Otherwise, it violates the principle of authenticity in accounting.

There is no unified international quantitative standard for the recognition of bad debts, and according to the definition of bad debts, accounts receivable that are generally considered to be bad debts if there is conclusive evidence or obvious indications that they are uncollectible. In the case of relatively developed commercial credit, relatively orderly credit and relatively stable economic environment, the reasons for bad debts are usually as follows: (1) the amount of overdue accounts is too small to pay for collection costs; (2) The outstanding amount arises from a disagreement between the Company and the customer, and this part is recorded as a bad debt in order to maintain a good relationship with the customer.

It follows that, under normal circumstances, the loss due to bad debts should be less than the cost of collection or the loss caused by the abandonment of an account receivable, or should be less than the sum of the two. In addition, when the debtor goes bankrupt or dies, the accounts receivable that cannot be collected after the liquidation of the bankruptcy estate or estate shall be recognized as bad debts. In judging whether a sum should be converted into a bad debt, it should be judged whether it has the following characteristics:

1) The debt relationship has been established; (2) the debtor is known; (3) determination of the amount; (4) The debt is considered irrecoverable. Among them, the debt relationship has been established, that is, whether the accounting is correct at the time of business occurrence, and whether the expenditure that does not belong to the debt relationship is listed as accounts receivable. If so, it is destined to be unrecoverable at the time of its occurrence and is not a "bad debt" in the true sense.

For example, the local government builds large-scale projects or "raises funds" from enterprises for various reasons. For the treatment of such a type of payment, we believe that it can be divided into the following two situations: if it can have property rights after completion in the future, it should be treated as foreign investment; If you cannot own property rights in the future, it is equivalent to sponsorship expenses, and when the expenses are incurred, they should be treated as non-operating expenses, and should not be reflected in the accounts receivable, otherwise they will only become old accounts that can never be recovered.

Due to historical reasons, there are not a few Chinese enterprises, especially state-owned enterprises, who have similar funds on their books all year round. Therefore, the content of accounts receivable accounting should not be ignored in strict regulation, so as not to cause "bad debts" that should not be bad debts in the future.

In fact, bad debts of banks are the funds that cannot be recovered, which are also called bad debts, and the main reasons are as follows:

1. If the principal and interest of an overdue loan have been in arrears for more than 180 days and have not been repaid, it will be classified as a bad debt.

2. Sluggish loans, loans that are overdue for three years.

3. Bad debts, the death or flight of the lender, and some special accounts are also bad debts.

Extended information] 1. How will the bad debts of the bank be handled?

1.Auction collateral or a good guarantor to repay, if there is collateral or guarantor at the time of loan application, you can sell the assets to recover the funds.

2.If the lender dies, the estate left behind will need to be used to pay off the arrears. If the estate is not enough to pay off, the heirs will pay it back, of course, the heirs can also choose not to inherit the estate, and the bank will recognize it.

3.If the enterprise owes money and has no money to repay the loan, but there is a broad market space, the bank will provide the enterprise with working capital, so that the enterprise can continue to open and slowly repay the loan by borrowing new to repay the old.

4.Through the financial asset management company to collect bad debts from banks, China has set up four asset management sites, Cinda, Dongfang, Great Wall and Dongrong, to collect bad debts, that is, official collection.

2. Will the bank's bad debts still be pursued after three years?

1.After three years of bad bank debts, they will still be chased. Bad bank debts mainly refer to loans that cannot be recovered or are difficult to recover.

If a bank wants to operate for a long time, the lower the bad debt ratio, the better. Because, when the borrower has not paid the debt for more than three years, the bank will generally make a record on the internal bill and mark it as a bad debt, but the bank will not give up the collection. In general, the priority period for collection is three years.

If the lender does not make one or more effective collections on the borrower within three years, it means that the lender has given up the collection, and the account is not counted. Although the bank will list the bad debt as "potentially unrecoverable", in order to avoid other situations, it will still choose to collect it once on a regular basis to ensure that the bill is within the prosecution period.

2.In the event of the death of the borrower, the borrower's legacy will be used to pay off the outstanding loan. If it is not enough, then if the heir wants to inherit the estate, he or she will have to pay the arrears during the borrower's lifetime, and if the heirs do not inherit, the previous arrears will be determined according to the wishes of the heirs.

Bad debts, also known as bad debts, also known as bad debts, refer to all kinds of receivables that enterprises determine cannot be recovered, and the bad debt losses of enterprises are confirmed in accordance with the provisions of the Notice of the Ministry of Finance on Establishing and Improving the Management System of Enterprise Receivables (Cai Qi [2002] No. 513).

The conditions for when an account receivable can be recognized as bad are usually given by accounting standards or systems. No matter how the accounting standards or systems change, in accounting practice, the recognition of bad debts should follow the basic objectives of financial reporting and the general principles of accounting, and try to ensure that the real bad debt losses are real, accurate and in line with the actual situation of the unit. Generally speaking, accounts receivable should be recognized as bad debts if they meet one of the following conditions:

1. The debtor's death and the unrecoverable accounts after the debtor's estate is repaid;

2. If the debtor is bankrupt, the accounts that cannot be recovered after the bankruptcy estate is repaid;

3. The debtor has failed to fulfill its debt repayment obligations for a long period of time, and there is sufficient evidence to show that it is impossible to recover or the accounts that are unlikely to be recovered.

Each of the above three conditions is sufficient, and the third condition requires the professional judgment of the accountant. China's current system stipulates that the right to decide the bad debt loss of a listed company lies with the company's board of directors or shareholders' general meeting.

Check the method. Auditors should use the review method and review method to check the year-end balance of the "accounts receivable" account and the relevant detailed account amount of the "management expenses" account, check whether the scope and standard of the enterprise's bad debt reserve are correct, and whether there is any adjustment of the current profit and loss by under-mentioning or over-mentioning the bad debt provision.

By reviewing the accounts such as "bad debt provision" and "management expenses" to check whether the enterprise has used the inconsistencies between the front and late stages of the direct resale method or the allowance method to adjust the current profit and loss; Review the debit amount of the "bad debt provision" account and related original vouchers, and verify whether there is any artificial overcharge or undercharge of bad debt provision.

Review the credit amount of the "bad debt provision" account or the corresponding account and related original vouchers, and check whether the enterprise has recorded the recovered and written off bad debt losses in other accounts such as the "accounts payable" account instead of recording them in the "bad debt provision" account.

Bad debts are loans that have been carefully verified and confirmed to be irrecoverable, including:

1. Loans that cannot be repaid after liquidation because the borrower has been declared bankrupt in accordance with the law;

2. The borrower dies or is declared dead, and the loan cannot be repaid after being repaid with his property or estate;

3. The borrower suffers from a catastrophic natural disaster.

or an accident with a huge loss that cannot be repaid even if it is compensated by insurance;

4. The loan approved by the *** project is approved and written off.

Enterprises should set up a "bad debt provision.

Accounts, which estimate the uncollectible accounts receivable according to a certain percentage.

Included in the bad debt provision account, if the accounts receivable that cannot be recovered are estimated to be recovered, the corresponding amount of the bad debt provision should be carried forward back to the "accounts receivable" account.

The occurrence of bad debts means that the receivables are confirmed to be unrecoverable.

Provision for bad debts. The allowance method is used.

At the end of the period, the provision for bad debts shall be made according to the balance of receivables, and the accounts receivable shall be written off with the provision for bad debts when it is confirmed that the receivables cannot be recovered.

Bad debts are receivables that cannot be recovered or have little chance of being recovered. The loss due to the occurrence of bad debts is called bad debt loss.

Bad debts occur in the enterprise.

Bad debt losses are a normal phenomenon. In accordance with the relevant regulations of our country, if the accounts receivable of an enterprise meet one of the following conditions, it shall be recognized as bad debts:

Due to the death of the debtor, it is still unrecoverable after the settlement of the debtor's 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 very small. According to the nature of the property, the various property losses of an enterprise can be divided into losses of monetary funds, losses of bad debts, losses of inventories, losses of investment transfer or liquidation, losses of fixed assets, losses of projects under construction and construction materials, losses of intangible assets, and losses of other assets and assets. According to the declaration and deduction procedures, it is divided into self-declaration and deduction of property losses and deduction of property losses after approval; According to the cause of loss, it is divided into normal loss (including normal transfer, scrapping, liquidation, etc.) and abnormal loss (including war and natural disaster).

and other force majeure losses, losses caused by human management responsibility, losses caused by theft, losses caused by policy factors, etc.), assessment losses such as restructuring and permanent substantial damages.

Extended Material: Balance Percentage Method.

Refers to the method of estimating bad debt losses as a percentage of the balance of accounts receivable at the end of the period.

Under the balance percentage method, the percentage of bad debts is determined by the enterprise based on past information or experience, and the enterprise should estimate the balance of the bad debt reserve account at the end of each accounting period according to the balance of the accounts receivable at the end of the period and the corresponding bad debt rate, and then the difference compared with the existing balance of the bad debt provision account before the adjustment is the amount of bad debt provision for the current period.

The formula for calculating the provision for bad debts using the balance percentage method is as follows:

1.Calculation formula for the first provision for bad debts:

Provision for bad debts accrued in the current period = balance of accounts receivable at the end of the period Percentage of provision for bad debts.

2.Calculation of bad debt provision in the later stage This jujube formula:

Bad debt provision accrued in the current period = Bad debt provision amount accrued in the current period calculated according to accounts receivable + - Debit balance (or credit balance) of bad debt provision account