Issues Related To Accounts Receivable Provision For Bad Debts

At the end of 1999, the Ministry of Finance promulgated the supplementary regulations on accounting treatment of Limited by Share Ltd accounting system (accounting document [1999]35, hereinafter referred to as "documents").

This provision is conducive to the more robust accounting treatment of listed companies, the reduction of arbitrary adjustment of profits, the improvement of the company's financial statements and the results of the fair procedures, prompting the company to strengthen the management of accounts receivable, but also to the accounting practice has brought some urgent problems to be solved.

The age of accounts is divided.

The document stipulates that the age of accounts is divided into six sections, that is, 1 years, 1 years to 2 years, 2 years to 3 armies, 3 years to 4 years, 4 years to 5 years and more than 5 years.

In today's pluralistic demand for accounting information, this division is reasonable, but it ignores the age of accounts receivable, that is, the longer the age of accounts is, the less likely it will be to recover, and that is, the nature of accounts receivable, that is, accounts receivable are current assets rather than long term assets.

Two, about the concept of overdue.

The document does not specify clearly what circumstances are overdue and under what circumstances it is not overdue.

In my opinion, "term" refers to credit period and payment period in accounts receivable.

The modern economy is, in a sense, the credit economy. The seller usually gives the buyer a certain period of payment, which exceeds the payment credit period and becomes a late account receivable.

In practice, many accounts receivable of enterprises are overdue, and the real risk of accounts receivable lies in this.

Because of the credit crisis caused by "triangle debts" and other reasons, enterprises usually determine the starting point of overdue payment when determining the age of accounts receivable, which confuses two different meanings of overdue and overdue. It should distinguish between overdue and overdue accounts receivable.

Three, about age determination.

There is no uniform standard for determining the age of accounts.

There are four ways to identify the age of accounts receivable at the end of the year: the actual account age method, FIFO method, last in first out method and last account age method.

The following are examples for illustration.

Example: A company receivables B company 8 million yuan in December 31, 1997, the account age is more than 2 years; in December 1998, the amount of B company receivable should be increased by 2 million yuan. In the same month, B company paid A company 2 million yuan.

A company in December 31, 1998 receivables B company's balance of 8 million yuan.

1, actual account age method.

If A company 2 million yuan is to add 1997 accounts receivable, then A company's 98 year's 8 million yuan balance is: the 3 year old account age 6 million yuan, and the 30 year old account 2 million yuan. If it is to withdraw the 1998 year, then the 8 million yuan balance of A company at the end of 98 is all over the age of more than 2 million years.

2, FIFO.

The balance of A company at the end of 98 is 8 million yuan: 3 years old, 6 million yuan, 30 days old, 2 million yuan, 3, and first in, first out.

The balance of A company's 8 million yuan at the end of 98 is over 3 years old.

The 4 and last account age method.

If all the accounts receivable account is positive, the total balance of the account will be regarded as the age of one year.

The balance of A company at the end of 98 is 8 million yuan.

In the four methods, the first in first out Fabio FIFO is more in line with the prudence principle.

The actual account age rule is the most accurate and reasonable, but it requires the company to reflect the occurrence and recovery of accounts receivable one by one in accounting treatment.

Finally, the account age method is simple, but it does not meet the actual situation of account age.

From the above, we can see that in different ways, the accounts receivable at the end of the year should be prepared differently, and the final assets and profits will be different.

Four, about the ratio.

The paper stipulates that the ratio of provision for bad debts should be determined by the company itself, but the proportion should be reasonably estimated.

In practice, it is difficult to reasonably estimate the proportion of bad debts provision, and it is impossible to find reasonable basis in the rapidly changing market economy to determine the proportion of provision.

Thus, to some extent, it provides convenience for the company to adjust the provision of bad debts artificially and adjust the profit of the company.

In view of the above problems, the author suggests: 1.

With the increase of the age of accounts, the distance between age segments of each account is gradually extended.

Account age can be divided into: Zhu overdue, overdue within a year (less than one year accounts receivable subdivided into 30 days, 30-180 days, 180-360 days), overdue 1 to 2 antlers, 2 to 5 army, 5 years or more 5, will not overdue accounts receivable separately in the annual report.

2, implement double analysis of account age.

At present, the enterprise adopts the age analysis method. The key is not only to analyze the age of accounts, but also to analyze the over age of account age.

To prevent the confusion of concepts and cause the corresponding balance of accounts receivable.

The information provided by enterprises is more real and useful.

3, special provision for proportion.

Accounts receivable shall not be accounted for not to exceed 1%.

A unified standard of proportions should be drawn for the rest of each age bracket to ensure compliance.

4, define the age standard.

There can be only one standard, and it can only be formulated by the government.

Only in this way can the accounting practice be followed and the accounting information is kept consistent.