Most enterprises will accrue bad debt provision for receivables that are not sure to be recovered. When accruing, you can use the credit impairment loss account and the bad debt provision account for accounting. What should you do with specific accounting entries?
Accounting entries for provision for bad debts
(1) Accounting entries for the first provision for bad debts:
Debit: credit impairment loss
Credit: bad debt reserves
(2) Accounting entry when bad debt actually occurs:
Debit: bad debt reserves
Credit: accounts receivable
(3) Accounting entries for recognized bad debts and recovery:
Debit: accounts receivable
Credit: bad debt reserves
At the same time.
Debit: bank deposit
Credit: accounts receivable, etc
(4) Accounting entries for offsetting (reversing) the over accrued bad debt provision:
Debit: bad debt reserves
Credit: credit impairment loss
What is bad debt provision?
Bad debt provision is a provision account for receivables of an enterprise. The allowance method is used by enterprises to account for bad debt losses. Under the allowance method, an enterprise needs to estimate bad debt losses at the end of each period and set up a "bad debt provision" account. The allowance method refers to the use of certain methods to estimate bad debt losses on a regular basis (at least at the end of each year), withdraw bad debt reserves and transfer them to current expenses; When a bad debt actually occurs, it is a method to directly offset the accrued bad debt provision and write off the corresponding balance of accounts receivable.
What is the credit impairment loss?
Credit impairment loss refers to the loss caused by the fact that the book value of accounts receivable is higher than its recoverable amount. The reason for the enterprise's credit impairment loss is that the enterprise cannot recover due to the buyer's refusal to pay, bankruptcy, death and other reasons. Credit impairment loss is a profit and loss account, which is consistent with the situation reflected by asset impairment loss. This account is recorded as debit when it is increased and credit when it is decreased.
Accounting entries for provision for bad debts
The accounting entries for withdrawing bad debt reserves are as follows:
1. The accounting entries for the provision for bad debts of the enterprise are as follows:
Debit: credit impairment loss.
Credit: provision for bad debts.
2. The accounting entries of unrecoverable accounts of the enterprise are as follows:
Debit: provision for bad debts.
Credit: accounts receivable, etc. (recorded into corresponding accounts according to accounts receivable).
3. After the enterprise expects to recover the bad debt, the accounting entry is as follows:
Debit: accounts receivable, etc. (recorded into corresponding accounts according to accounts receivable).
Credit: provision for bad debts.
4. The accounting entry for the final collection of all payments by the enterprise is:
Debit: bank deposit.
Credit: accounts receivable, etc. (recorded into corresponding accounts according to accounts receivable).
Bad debt confirmation audit
1. Strictly screen whether the bad debt loss is due to the content of accounts receivable, and whether there are any accounts receivable that are not included in the content of accounts receivable, resulting in artificial "bad debt".
2. Whether accounts receivable overdue for less than three years are treated as bad debt losses.
3. Whether there is any false bad debt loss. For example, in order to achieve a certain purpose, an enterprise falsely opens up its sales revenue to form a false account receivable, which is not cleared up in time, and has been on account for more than three years, nominally forming a bad debt loss.
What are the accounting entries for withdrawing bad debt reserves?
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Accounting entry for withdrawing bad debt provision: Debit: credit impairment loss - withdrawn bad debt provision; Credit: bad debt provision. When bad debt occurs, debit: bad debt provision, credit: accounts receivable, etc. Withdraw confirmed bad debts and write off receivables to cancel bad debts, debit: accounts receivable, etc., credit: bad debt reserves. Collection of accounts, debit: bank deposits, credit: accounts receivable, etc.
Bad debt provision refers to the provision of accounts receivable (including accounts receivable, other receivables, etc.) of an enterprise. It is an allowance account. The allowance method is used by enterprises to account for bad debt losses. Under the allowance method, an enterprise needs to estimate bad debt losses at the end of each period and set up a "bad debt provision" account. Accounting entry for withdrawing bad debt provision: Debit: credit impairment loss - withdrawn bad debt provision; Credit: bad debt provision. When bad debt occurs, debit: bad debt provision, credit: accounts receivable, etc. Withdraw confirmed bad debts and write off receivables to cancel bad debts, debit: accounts receivable, etc., credit: bad debt reserves. Collection of accounts, debit: bank deposits, credit: accounts receivable, etc. An enterprise shall conduct a comprehensive inspection of receivables at regular intervals or at least at the end of each year, predict the possible bad debts of various receivables, and accrue bad debt reserves for receivables that are not sure to be recovered.
The method of withdrawing bad debt reserves shall be determined by the enterprise itself. An enterprise shall list a list, specifically indicating the scope of provision for bad debts, the method of withdrawal, the division of account age and the proportion of withdrawal. According to the management authority, it shall be approved by the shareholders' meeting or the board of directors, or the manager (factory director) meeting or similar institutions, and reported to the relevant parties for filing in accordance with the provisions of laws and administrative regulations, and shall be placed at the company's location for investors to consult. Once the method of drawing bad debt reserves is determined, it shall not be changed at will. If changes are needed, they should still be submitted to the relevant parties for filing after approval according to the above procedures, and explained in the notes to the accounting statements. When determining the proportion of bad debt provision, an enterprise shall reasonably estimate it according to its previous experience, the actual financial position and cash flow of the debtor, and other relevant information.
Accounting treatment method:
1、 This item is used to calculate the bad debt reserves of enterprise receivables.
2、 This item can be accounted in detail according to the category of accounts receivable.
3、 The main link of withdrawing bad debt provision.
（1） On the balance sheet date, if the receivables are impaired, the "credit impairment loss" account shall be debited and the account shall be credited according to the amount that should be written down. If the bad debt provision that should be withdrawn in the current period is greater than the book balance, it should be withdrawn according to the difference; The difference between the provision for bad debts that should be accrued and the book balance should be made the opposite entry.
（2） Receivables that are really uncollectible shall be reported and approved as bad debts according to management authority. Receivables shall be written off, debited to this account, and credited to "notes receivable", "accounts receivable", "prepayments", "reinsurance accounts receivable", "other receivables", "long-term receivables" and other accounts.
（3） If the confirmed and written off receivables are recovered later, they should be debited into "notes receivable", "accounts receivable", "prepayments", "reinsurance accounts receivable", "other receivables", "long-term receivables" and other accounts, and credited into this account according to the amount actually recovered; At the same time, debit the "deposit" account and credit the "notes receivable", "accounts receivable", "prepayments", "reinsurance accounts receivable", "other receivables", "long-term receivables" and other accounts. If the confirmed and written off receivables are recovered later, they can also be debited to the "Bank Deposit" account and credited to this account according to the actually recovered amount.
4、 The ending credit balance of this account reflects the bad debt reserves that have been withdrawn but not written off by the enterprise
