You can check receivables one by one or all together. Bigger amounts should be checked individually. Smaller ones can be reviewed as a group. Historical data on past due receivables can be used to estimate potential losses when assessing receivables collectively.<\/p>\n
The first step is to assess which receivables are unlikely to be collected<\/strong> and to recognise them as an expense. A receivable becomes a bad debt<\/strong> when there is reliable information indicating that the buyer is insolvent, at which point the receivable is written off from the balance sheet.<\/p>\n Review of doubtful receivables (31.12.20×1):<\/strong> Client A O\u00dc invoice was paid, so the earlier expense was reversed (18.03.20×2):<\/strong> To write off a receivable from the balance sheet and ledger, it is necessary to create a new account under “Accounts and cash” (if it hasn’t been created previously).<\/p>\n Settings -> Accounts and cash -> New account\/cash register<\/a><\/span>
\nDebit<\/strong>: 5550 Bad debts expense
\nCredit<\/strong>: 1290 Doubtful receivables<\/p>\n\u25cf<\/span> If you review each receivable separately<\/strong>, the accounts remain the same, but it is recommended entering each receivable as a separate line under account 5550<\/strong> Bad debts expense. In the “Description”<\/strong>\u00a0field of the transaction, include the customer name and the invoice number that has been assessed as unlikely to be collected.
\nThis way, the transaction will show which invoices you have reviewed. If the situation changes \u2014 for example, the customer pays an invoice previously assessed as bad debts expense \u2014 you can reverse the transaction for the respective amount.<\/p>\n
\nDebit<\/strong>: 5550 Bad debts expense: Client A O\u00dc, invoice 222 (300 EUR)
\nDebit<\/strong>: 5550 Bad debts expense: Client C O\u00dc, invoice 201 (200 EUR)
\nCredit<\/strong>: 1290 Doubtful receivables (500 EUR)<\/p>\n
\nDebit<\/strong>: 1290 Doubtful receivables (300 EUR)
\nCredit<\/strong>: 5550 Bad debts expense: Client A O\u00dc, invoice 222 (300 EUR)<\/p>\n<\/div><\/div>\n
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