What are the Methods for Calculating the Estimate for Bad Debt Accounts?

What are the Methods for Calculating the Estimate for Bad

Any company that wants to endure over time and survive constant external changes must record and monitor continuously. The status of your accounts, financial status and various items to keep. Decision making in the company is affected by the state of the accounts of them, because by registering them we can know whether or not we can risk new projects.

That is why companies consider it very important to have highly qualified personnel, that is, specialists and professionals who provide the same productivity and efficiency. To carry the record of these accounts accounting is used, We can say that accounting deals with inquiring, examining, evaluating, analyzing the economic state of the company.

By obtaining the necessary information regarding the accounts, it is known whether the resources were used effectively or there were losses. Currently there are several types of accounting that you can use in your company, organization or institution, you just have to consider which one suits you best.

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Financial accounting shows the financial situation, what was the management, in addition to the expenses and movements that were made economically at the internal level. In accounting you can use different criteria to measure these statements, from the historical, current and realizable value, its equity, financial statements and the existing accounting books.

Different accounting is handled types of accounts such as: current, fixed, intangible, tangible assets, deferred charges. There are also the memorandum accounts, liabilities circulating, long and short term, capital, all these main accounts contain their classification according to their purpose for their calculation.

Many companies to keep a better record prefer to use two types of books: one to keep track of cash inflows and outflows, and one for bank, both of which are important for the daily record.

Many companies today have an accounting information system to keep their records, not only manually but also automated, which contain several elements. However, it may happen that in the registry of your books at the time of analyzing them you find bad debts.

What are bad debts?

Uncollectible accounts are those accounts from which their amount can be part of the company’s losses, since they are derived Old credits granted that have not been collected or canceled by your clients.

hand drowns among bad debts

It can be considered a uncollectible account When it has been approximately a year since you contracted the credit with your client and the established deadlines have not been met, even though the company has used innumerable elements for its collections. That is why many companies register a forecast of bad debts through an online system that there are many, in order to recover the amounts of loans granted and not paid.

What are the methods for estimating bad debts?

exist various methods in accounting such as to make calculations with the doubtful accounts estimation method. This estimation method is the most used by companies due to its efficiency since the calculations are carried out without waiting for the end of the fiscal year.

The estimation method is where the forecast is appliedIn the aforementioned, this contains an approximate percentage of these pending and current accounts, which does not affect the expenses or income in the book. Or perhaps if you prefer, you can run it using the same estimation method using the fixed percentage method, which you apply to the accounts receivable recorded in your books for sales made on credit.

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The direct cancellation method which you can apply, if the amount owed to you is not a large amount of money, also this method does not affect the costs of your income obtained in the time it was created.

Even periodically it is necessary to carry out internal accounting, if you follow supervision and control you will guarantee its proper functioning. In the calculation method you analyze your accounts according to their time or age and then assigns a percentage to these accounts receivable.

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