Bad debts in personal credit reports mean bad debts or dead debts. It refers to the receivables that have passed the repayment period and cannot be recovered after calls. They have been in a sluggish state for a long time and may become bad debts.

In the income statement, bad debt losses are usually classified as sales expenses in operating expenses. Some companies also classify them as administrative expenses. There are usually two methods of accounting for bad debts: the direct write-off method and the allowance method:

(1) Direct write-off method: that is, bad debts are written off directly from accounts receivable in the current period when they occur, and recorded as for bad debt expenses. This method is relatively simple, but it does not reflect the matching relationship between accounts receivable and bad debt losses in terms of time and quantity, so it does not comply with the matching principle.

(2) Allowance method: that is, based on the amount of accounts receivable in each period and different arrears periods, the bad debt losses of each period are estimated periodically and calculated as expenses for the current period, and recorded in the allowance account .

This method is more complicated than the direct write-off method. Adopting this method can not only match the bad debt losses with related income, but also help reflect the estimated realizable amount of accounts receivable on the balance sheet at the end of the current period.

Extended information

When all or part of an account receivable is confirmed as bad debt, the bad debt provision should be offset according to its amount, and the corresponding account receivable should be written off at the same time. amount.

Using this method, on the one hand, the bad debt losses are estimated on time and recorded into management expenses; on the other hand, the "bad debt provision" account is set up, and the bad debt provision and the amount of accounts receivable are written off when bad debts actually occur, so that the assets and liabilities Accounts receivable on the table reflect the net value after deducting estimated bad debts.

(1) When making provision for bad debts:

Debit: asset impairment loss──provision for bad debts

Credit: provision for bad debts

(2) When bad debt provision occurs:

Debit: bad debt provision

Credit: accounts receivable

(3) Confirmed and transferred If the bad debt loss is recovered later

Debit: accounts receivable? At the same time: debit: bank deposits

Credit: bad debt provision? Credit: accounts receivable

Baidu Encyclopedia-Bad Debt