Bad Debt Journal

                                                Uncollectible Account Expense/Bad Debt
Uncollectible Receivables:

Uncollectible receivables arise because of the risk of receivables that cannot be paid by the debtor of the company for various reasons, such as bankruptcy, bankruptcy, major force, customer characteristics, etc. The more accounts receivable given, the more the amount of receivables will not be paid.

There are two methods for treating this Bad Debt:

Direct Method:

Methods that use the method of direct removal of receivables that are truly known will not be paid.

Illustration:

November 30, 2017 The company's trade receivables CV.123 amounted to Rp. 10,000,000 will not be billed because of bankruptcy.

Journal:

D: Uncollectible Receivable Expenses Rp. 10,000,000
K: Trade Receivables Rp. 10,000,000

Upon CV.123 Trade Receivables which had been deleted on November 30, suddenly on December 5, the payment of receivables from CV. 123 worth 10,000,000 was received again.

Then the Journal:

D: Trade Receivables CV.123 Rp. 10,000,000
K: Uncollectible Receivable Expenses Rp. 10,000,000

D: Cash Rp. 10,000,000, -
K: Trade Receivables-CV.123 Rp. 10,000,000


Allowance Method:

       The method that uses indirect removal method is the method of allowance in the calculation of accounts that cannot be collected. There are two basic calculations for the allowance for uncollectible accounts, which consist of:


    percentage of Trade Receivables,
     percentage of Credit Sales


To calculate the amount of allowance for Uncollectible Accounts from the percentage of total Credit Sales obtained by the company in one accounting year.


Illustration:

The company determines the amount of Allowance for Uncollectible Receivables is 5% of Sales Credit. As for the results of Sales Loans obtained during 2017 are Rp. 20,000,000

Then the Allowance for Uncollectible Accounts = 5% x Rp. 20,000,000 = Rp. 1,000,000


Journal:

D: Uncollectible Receivable Expenses Rp. 1,000,000
K: Allowance for Uncollectible Accounts Rp. 1,000,000


However, there are trade receivables from CV.123 amounting to Rp. 20,000,000 - obviously no longer be billed, then made:


Journal:

D: Allowance for Uncollectible Receivables Rp.20,000,000
K: Trade Receivables-CV.123 Rp. 20,000,000


When in the future there was a good will from CV.123 to repay the trade debt worth 10,000,000 which was deleted, then made:


Journal:

D: Trade Receivables CV.123 Rp.10,000,000
K: Allowance for Uncollectible Receivables Rp.10,000,000

CV.123 actually pays the Trade Debt then it is made:

Journal:

D: Rp.10,000,000 cash
K: Trade Receivables-CV.123 Rp. 10,000,000