Impairment of bad debts

, , ,
collective procedure

Impairment of bad debts : 

This is a major concern for accountants and CPAs. Indeed, it is a crucial accounting practice to assess the value of outstanding receivables and to record potential losses. This assessment can be complex, as receivables can be affected by many factors such as customer creditworthiness, ongoing litigation or economic difficulties.

When receivables are considered doubtful, companies are required to write them down. This depreciation is recorded as a loss on accounts receivable. It allows the value of the receivable to be realistically reflected in the company's accounts.

Impairment of bad debts

Impairment of bad debts

The accounting treatment of bad debts;

is governed by strict accounting standards, including IFRS and French standards. In order to properly record losses on accounts receivable, it is essential to understand the different methods of receivable impairment. The most common method is the percentage of sales method, which applies a fixed percentage to sales over a given period. Other methods such as the probable loss method and the net recoverable amount method can also be used.

When receivables are definitely uncollectible, companies can obtain a certificate of uncollectibility via the debt collection platform This certificate allows to record the total loss on the accounts receivable.

Make accounting entries for write-downs and losses on accounts receivable:

in French accounting is relatively simple. To record a write-down, the bad debt expense account should be debited and the trade receivables account credited. To record an uncollectible loss, debit the bad debt expense account and credit the bad debt loss account.

In summary, bad debt impairment is an important process for businesses.

Thus, it is essential to understand the different methods of receivables impairment, as well as the accounting treatment of losses on accounts receivable. By obtaining a certificate of uncollectibility through the debt collection platform, companies can record total losses on accounts receivable and reduce their tax burden.

0 answers

Leave a comment

Join the discussion?
Feel free to contribute!

Leave a comment

Your email address will not be published. Required fields are marked with *.

This site uses Akismet to reduce spam. Learn more about how your comment data is used.