Bad Debt | Doubtful Debt | Ageing Analysis

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When the sale is made on credit, there’s a risk the Organization may not receive the cash that the customer owes it.

If significant doubt exist as to the recoverability of the amount then the organization will record it as a provision
Allowance for Bad Debt to
Provision for Bad Debt

If the customer dies, disputes the payment or goes bankrupt then the Organization will record bad debt as
Provision for Bad Debt to
Receivables

Conversely if the cash flow situation improves then the organization will reverse off the provision and record as
Provision for Bad Debt to
Allowance for Bad Debt

Organizations do ageing analysis of the overdue amounts to assess the likely hood of default to assess the provision required to be recorded.

#BadDebts #DoubtfulDebts #AgeingAnalysis

MRM is a Team Comprising of professionals experienced in Corporate and Project Finance, Transaction and Accounting Services, Taxation and Corporate Advisory Experience.