Provision for doubtful debts: posting in accounting and tax accounting

In the event that there are doubtful debts in the accounting, the enterprise is obliged to form the reserve of the same name. This provision is contained in paragraph 70 of the PBU. It does not matter, there was a provision for doubtful debts in the tax account or not. This provision is explained in the Letter of the Ministry of Finance. Next, let us consider in more detail how the provision is made for doubtful debts in accounting. Posting of invoices will also be described in the article.

Definitions

As doubtful is any debt that emerged when selling goods, performing work or providing services, if it is not repaid within the time period established in the contract, and is not secured by a bank guarantee, surety, or a pledge. Hopeless obligations are those for which the statute of limitations has passed , or which are terminated due to the impossibility of execution.

General information

Reserves for doubtful debts 2015 can be formed by banks on the delay of interest that arose after January 1 of the specified year. It does not matter whether there is a pledge, guarantee or surety. For companies that determine expenses and incomes using the method of calculation under contracts of coinsurance, insurance, reinsurance with formed reserves, the reserve for doubtful debts relating to the payment of premiums (contributions) is not created.

Hopeless liabilities

As such, among other things, such debts are recognized, the impossibility of payment of which is confirmed by the bailiff's decision on the completion of the enforcement proceedings, upon return to the recoverer of the relevant document on the basis of:

• Impossibility 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, on his accounts, in the custody or in the deposits of banks and other credit companies.
• Absence of the necessary property in respect of which the penalty may be enforced, and all the measures taken by the bailiff did not bring the required result.

An Important Moment

If the company is recognized as a small business entity, then it also needs to create a reserve for doubtful debts. In paragraph 70 of the PBU there are no indications of the exemption of such enterprises from this procedure. In the letter of the Ministry of Finance No. 07-02-18 / 01 there is, however, a precept according to which the reserve for doubtful debts can not be formed if the company has confidence at the reporting date that the overdue accounts receivable will be repaid.

Solvency of the counterparty

Consider how to create a reserve for bad debts. To assess the company's solvency, it is necessary to collect all available information about the organization's activities. For example, to obtain information on probable liquidation, an extract from the Unified State Register of Legal Entities is requested. Accounting information is one of the sources of information about solvency. It can be obtained from the statistics bodies. 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 the debt that is unrealistic for collection. Insolvency signs can be fixed in the financial documentation of the enterprise. The allowance for doubtful debts is an evaluation criterion. Its formation, increase or decrease is necessarily reflected in expenses or revenues.

Creation of a reserve for doubtful debts in accounting

The order of formation is developed by the enterprise independently. In this case, the established scheme should be fixed in the financial documentation of the company. The creation of a provision for doubtful debts in accounting is carried out as follows:

1. The obligation of counterparties, outstanding in the terms specified by the contract and not provided with necessary guarantees is defined.
2. For each specific doubtful debt, the amount by which the reserve should be created is determined. At the same time, the financial status of the counterparty is taken into account and the probability of paying off the obligation in full or in part is assessed.

This order is provided for in § 70 of the PBU.

Provision for doubtful debts: posting on accounts

The deductions under this item are recorded in other expenses. Account 63 specifies periodic deductions and the creation of a reserve for doubtful debts. In this case, the posting will be as follows:

Debit on account 91-2 Credit on account 63 - formation of stock.

The counterparty may discharge the obligations partially or completely. In this case, the part of the reserve is restored, which is reflected as follows:

Debit sc. 51 (50) Credit сч. 62 - part of the obligations was repaid.

Debit sc. 63 Loan on acc. 91-1 - recovery of the provision for the paid debt.

Analysis of accounts receivable from acc. 62 should be organized so that it is possible to receive all necessary information about unpaid parts. This requirement is provided in the Instruction to the Chart of Accounts.

Deductions

They are reflected in other expenses for acc. 91. In connection with this, the creation of a reserve in the balance sheet causes a decrease in the profit of the reporting period. The costs that are 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, there is no expense. In this case, the difference between profits (losses) is formed. In the forthcoming reporting periods, it is assumed that the obligation is canceled or written off as uncollectible. In this regard, the resulting difference in accounting, in fact, is temporary. This is explained in PBU 18/02, paragraph 8. The temporary difference leads to the formation of a deferred tax asset. It reduces the amount of the deduction for profit, which must be paid in the periods following the reporting period. This provision is explained in PBU 18/02, in paragraph 11. For a deferred asset, the occurrence of which caused the creation of a provision for doubtful debts, the posting will be as follows:

Debit sc. 09 Credit ac. 68, sub.ch., reflecting calculations on deductions for profit - the deferred asset is indicated.

In the future, the reserve can be restored when the debt is repaid. The amount is included in other income and is reflected in the acc. 91. Recovery may occur as a result of payment by the counterparty following a period that follows the one in which the provision for doubtful debts has taken place. The wiring in this case is similar to the above. The amount is also included in other income at acc. 91. The reserve can be used - due to it bad debt is written off.

Reduction (repayment) of deferred assets

When the reserve is restored in the financial balance, there will be incomes that will not be recognized in the tax account. When using the stock, costs will be generated. They were already taken into account when the provision for doubtful debts was made. The posting in this case is as follows:

Debit sc. 68, the subaccount, fixing calculations on deductions on profit, Credit сч. 09 - the deferred asset is reduced (repaid).

Obligation in foreign currency

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 economic transactions and liabilities is conducted in rubles. In this regard, the creation and change of the reserve is also carried out in the domestic currency. In the PBU 3/06 paragraph 7 there is no revaluation. Nevertheless, in accordance with the results of the inventory, the company can adjust the amount of the reserve due to the recalculation of the receivable at the official rate. This provision follows from clause 3.54 of the Methodological Recommendations approved under Order of the Ministry of Finance No. 49 of June 13, 1995.