Write-off of accounts receivable

Probably, every economic subject in its activity faced such a problem as writing-off of receivables. Any action of the organization should be displayed in the balance sheet and have good reasons for this, as documented.

First of all, it is necessary to determine what accounts receivable are. It can be called exactly the amount of debt that the economic entity of our organization must return, that is, it is the obligation of one legal entity to another. If the timely fulfillment of these obligations is not carried out, the creditor takes concrete measures. As a rule, simply submits a statement of claim to the court.

A special group is the write-off of a bad debt receivable. Bad debts are understood as those that can not be covered from the reserve fund of the enterprise and the return of which is considered impossible in connection with the total insolvency of the borrower.

Write-off of accounts receivable should be made only after a certain time, called the limitation period, which is established in court. In most cases, the court designates a period of three years from the day following the date agreed between the contractors. According to the rules, the lender appeals to the borrower with claims for repayment of the debt. Then the obligation must be repaid in maximum after seven working days.

Write-off of accounts receivable: posting

In the accounting reports, the specialist transfers bad debts to collection of debts to an item of non-operating expenses of the enterprise. It is worth remembering that the correct write-off is carried out only in the period when the limitation period has expired. If the accounting department of the enterprise has displayed this posting in the report of the next period, then it is considered invalid. If errors are detected by state bodies, enterprises will have to prove their own innocence already in court. In this situation, it is sufficient for the economic entity to provide the tax service with a revised declaration, on the basis of which appropriate amendments will be made. In turn, the employee of the tax inspection has the right to carry out a desk audit, that is, clarify the veracity of the documents submitted. If errors or inconsistencies are detected, the enterprise receives an alert within three days. Errors must be corrected within five working days.

So, a bad debt is reflected in the financial statements in the form of a double entry on the accounts "Other income and expenses" (on debit) and "Settlements with buyers and customers" (on a loan). Separate posting of the loss is due to outstanding obligations on account 007, called "Write-off losses to the debt of insolvent creditors."

Write-off of accounts receivable refers to non-operating expenses, subject to the availability of a reserve fund. But the situation is singled out when the organization considers it inappropriate to create such a fund. In this case, debts directly affect the financial result. If the amount of debt exceeds the amount of the trust fund to cover unforeseen expenses, the uncovered portion is also reflected in the financial result at the balance sheet date.

In some situations, the accountant is entitled to write off the debts of the debtor before the end of the court's due date. Often this happens when the debtor's firm is liquidated on the basis of a court decision. And the creditor is obliged for five years to keep in his archive documents that are grounds for writing off the debt and confirm the fact that it is considered hopeless to be recovered. This need is explained by the fact that the tax authority can verify the veracity of the transaction data reflected in the balance sheet.

In addition, immediately before the write-off, the creditor is obliged to make an inventory of the debt, as it is accurately displayed in the documents. To do this, the head of the enterprise signs the appropriate order and forms a commission. Only after the end of these activities is it possible to display bad debts in the balance sheet.