If there are doubtful debts in accounting, an enterprise is obliged to form a reserve of the same name. This requirement is contained in paragraph 70 of PBU. At the same time, it doesn’t matter if there was a provision for doubtful debts in tax accounting or not. This provision is explained in the letter of the Ministry of Finance. Next, we consider in more detail how the creation of a reserve for doubtful debts in accounting is carried out. An account entry will also be described in the article.
Definitions
Any debt arising from the sale of goods, the performance of work or the provision of a service is considered doubtful if it is not paid off within the time period specified in the contract and is not secured by a bank guarantee, guarantee, or pledge. Bad obligations are recognized for those for which the statute of limitations has passed , or which have been terminated due to the impossibility of performance.
General information
Reserves for bad debts in 2015 can be formed by banks for interest arrears arising after January 1 of the specified year. It does not matter if there is a guarantee, guarantee or guarantee. For companies that determine expenses and incomes using the calculation method under co-insurance, insurance, reinsurance contracts with established reserves, a reserve for doubtful debts relating to the payment of premiums (contributions) is not created.
Bad obligations
Among them, among other things, such debts are recognized, the impossibility of payment of which is confirmed by the bailiff's decision on the completion of enforcement proceedings, when the relevant document is returned to the collector on the basis of:
- Inability to establish the place where the debtor himself or his property is located, or to receive information about the values and money belonging to him, located in his accounts, in custody or in deposits of banks and other credit companies.
- The absence of the necessary property in respect of which the recovery may be carried out, and all the measures taken by the bailiff did not bring the necessary result.
Important point
If the company is recognized as a small business entity, then it also needs to form a reserve for doubtful debts. In paragraph 70 of the PBU there is no indication of the exemption of such enterprises from this procedure. The Letter of the Ministry of Finance No. 07-02-18 / 01, however, contains a prescription according to which the allowance for doubtful debts can not be formed if the company at the reporting date has confidence that the overdue receivables will be repaid.
Counterparty solvency
Consider how to create a reserve for doubtful debts. To assess the solvency of the company, it is necessary to collect all available information about the organization. For example, to obtain information about a likely liquidation, an extract from the register is requested. As one of the sources of information on solvency acts financial statements. It can be obtained from the statistical authorities. In accordance with the reporting data, a number of standard coefficients are calculated. Their values show the financial status of the debtor. Based on the information received, a decision is made on the amount of the reserve or on writing off a debt that is unrealistic for collection. Signs of insolvency can be fixed in the financial documentation of the company. The provision for doubtful debts acts as an evaluation criterion. Its formation, increase or decrease is necessarily reflected in the composition of expenses or income.
Creating an allowance for doubtful debts in accounting
The formation procedure is developed by the enterprise independently. Moreover, the established scheme should be fixed in the financial documentation of the company. The creation of a reserve for doubtful debts in accounting is carried out as follows:
- The counterparty obligation is determined that is not repaid within the time period specified by the contract and not provided with the necessary guarantees.
- For each specific doubtful debt, the amount by which a reserve should be created is determined. In this case, the financial condition of the counterparty is taken into account and an assessment is made of the probability of paying off the obligation in whole or in part.
This procedure is provided for in paragraph 70 of PBU.
Creating an allowance for doubtful debts: posting to accounts
The deductions for this item are recorded in other expenses. Account 63 shows the periodic deductions and the creation of a reserve for doubtful debts. The posting in this case will be as follows:
The debit of account 91-2 The credit of account 63 - stock formation.
The counterparty may repay obligations in part or in full. In this case, a part of the reserve is restored, which is reflected as follows:
Debit ct. 51 (50) Credit account 62 - part of the obligations is repaid.
Debit ct. 63 Credit on account 91-1 - restoration of the reserve for paid debts.
Account receivable analysis 62 should be organized so that it is possible to receive all the necessary information about unpaid parts. This requirement is provided in the instructions to the chart of accounts.
Deductions
They are reflected in other expenses on the account. 91. In this regard, the creation of a reserve in the balance sheet causes a decrease in profit for the reporting period. The costs associated with its formation in the current financial cycle affect the profitability of the coming years. If a reserve is not created in the tax balance, then, accordingly, no expenses arise. In this case, a difference is formed between profits (losses). In the upcoming reporting periods, the obligation is expected to be settled or written off as hopeless. In this regard, the resulting difference in accounting, in fact, is temporary. This is explained in PBU 18/02, paragraph 8. A temporary difference leads to the formation of a tax deferred asset. It reduces the amount of deduction for profit, which should be paid in the periods following the reporting. This provision is explained in PBU 18/02, paragraph 11. For a deferred asset, the occurrence of which determined the creation of a reserve for doubtful debts, the transaction will be as follows:
Debit ct. 09 Credit Account 68, subaccount., Reflecting the calculations for deductions from profit - the deferred asset is indicated.
Subsequently, the reserve may be restored upon debt repayment. The amount is included in other income and is reflected in the account. 91. Recovery can occur as a result of payment by the counterparty based on the results of the period following the period in which the provision for doubtful debts took place. The wiring in this case is similar to the above. The amount is also included in other income in the account. 91. The reserve can be used - due to it bad debts are written off.
Decrease (repayment) of deferred asset
Upon restoration of the reserve in the financial balance there will be incomes that will not be recognized in tax accounting. When using stock - expenses will be formed. They were already taken into account at the time when the creation of a reserve for doubtful debts. The wiring in this case is as follows:
Debit ct. 68, sub-account, fixing calculations on deductions for profits, Credit account. 09 - deferred asset is reduced (repaid).
Foreign currency liability
The amount of the reserve in this case is determined in accordance with the amount of debt at the exchange rate at the date of its creation. Reporting in the Russian Federation on business operations and liabilities is in rubles. In this regard, the creation and change of the reserve is also carried out in domestic currency. In PBU 3/06 p. 7 revaluation is not provided. Nevertheless, in accordance with the results of the inventory, the company may adjust the amount of the reserve due to the recalculation of the receivable at the official rate. This provision follows from paragraph 3.54 of the Methodological Recommendations approved by Order of the Ministry of Finance No. 49 of June 13, 1995.