You need to create:
1. One alternative recon account for Special GL indicator
"E".
2. One expenses account for bad debts and 3. one for
provision on Doubtful debts account.
Configuration:
SPRO-AR&AP-Business transactions-Closing-Valuate-Reserve
for Bad debt.
1.Define Methods
Here you need to define methods means after how many
months client want to reclassify as bad debts and at percentage for how
many months.
2.Define Accounts for Reserve for Bad Debt
Here you need to assign bad debts expenses account and
provision account.
User end transactions:
1. Run F103:
It transfers the normal open items to special gl E.
Entry:
Customer account SP gl E debited
Customer account
2. After F103 you need to F104 for bad debts posting
Based on the percentages maintained for how many months.
System will automatically calculates the bad debts
Entry: Bad debts Dr
Provision CR.
The above steps are for automatically calculation of
Bad Debts.
If client doesn't want then tell them to pass manual entries.
Notes:
Both are maintained or entered manually. There is no customisation. You need to create three GL accounts. One in Balance sheet as "Provision for Bad Debts" and other two in P&L.
1st one will be bad debt account, wherein you need to actual post the value which is non-recoverable.
2nd will be the contra for the balance sheet account.
At the end of the month/ quarter etc., the company while creating the reserve, should pass the following entry:
Dr. A/c 2 (P&L)
Cr. Balance sheet A/c
Before creating the fresh, the earlier entry should be revered.
When actual bad debt happens, then after management approval, please pass the following entry:
Dr A/c 1 (P&L)
Cr. Customer (Clearing the open line item)
