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Help Sheet 008 Making Provisions for and Writing Off Bad Debts

Setting up for Bad Debt Recovery Nominal Ledger > Utilities > Ledger Set Up > Default Nominal Accounts These nominal codes may need setting up and should have no cost centre or department unless you are using Split Postings between Cost Centres for Balance Sheet. Bad Debt Write Off This is the Profit and Loss account used to post and analyse bad debts which are written off in the Sales and Purchase Ledger. Bad Debt Expense This is the Profit and Loss account used to post and analyse bad debt values when processed in the Sales Ledger. Bad Debt Provision This is the Balance Sheet account to which bad debt provisions postings are analysed (Sales Ledger only). Sales Ledger > Utilities > Ledger Set Up > Ledger Settings > Customer Defaults Tab Waiting period for recovery of VAT on bad debts set to 6 months This is the current legislation. Provisions for Bad Debt Sales Ledger > Adjust Transactions > Provisions for Bad Debt Select the customer account and then select the qualifying transactions and click Make Provision. When the provision is made the transactions will have a query flag of W set. The total of the transactions (including VAT) are credited to the Bad Debt Provision account in the Balance Sheet and debited to the Bad Debt Expense account in the Profit and Loss. The Provisions for Bad Debt option can also be used to make a correction for a provision. Select the customer account and then select the

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qualifying transactions and click Correct Provision. The opposite entries to the above are made to the accounts. Writing Off a Bad Debt This routine is used to post actual write offs. This can be for either transactions that have already been provided for or for any other outstanding transactions that have reached or exceeded the bad debt waiting period specified in the Sales Ledger settings. The bad debts do not have to have been already provided for. Sales Ledger > Adjust Transactions > Write Off Bad Debt You can choose whether this is for a single customer or multiple. You can then choose All Transactions or By Date Range and you can also choose whether to show provided for transactions only or all. Only transactions that qualify will be shown. Use the check boxes to decide which transactions are to be written off and then choose Write Off. If the VAT is not to be reclaimed then: The sales account balance is updated with a credit that has a reference of Write Off, with the goods amount set to the gross amount and the Vat at zero. If the items were previously provided for then the total value is debited to the provision for bad debts account in the balance sheet and a corresponding entry is made by crediting the sales control account. If the transactions were not previously provided for then the total of the transactions is debited to the bad debts account in the profit and loss and the sales ledger control account is credited. If the VAT is to be reclaimed and a provision was made then: A credit note is added to the customer account for the total goods and Vat. The total transactions including Vat is debited to the provisions for bad debt account. A credit is made to the debtors control account. The Vat account is debited with the value of the Vat. A credit is posted to the bad debts account. If the VAT is to be reclaimed and a provision was not made then: A credit note is added to the customer account for the total goods and Vat. The total goods value including Vat is debited to the bad debt account and a credit is made top the debtors control account. The Vat account is debited with the value of Vat and a credit to the bad debts account.

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Write Off Small Amounts Using this routine you can write off small amounts from a customer account even if the associated transaction is part allocated. The default maximum amount to write off is set to 200 but this can be overridden. Sales Ledger > Adjust Transactions > Write Off Small Amounts Choose single accounts or all. Accept the default nominal account for tax write offs or select the relevant account. Accept or override the maximum write off value. Then use the check boxes to choose what to write off and then click Write Off. The Bad Debt account is debited with the net value of the transaction, the Vat account is debited with the vat amount and the Sales Ledger Control Account is credited with the gross amount.

Sage Support: 01724 400340

Email: sagesupport@hbpsystems.com

Kamarin Computers Ltd www.kamarincomputers.co.uk

Propeg System Ltd www.propeg.co.uk

HBP Monpellier Ltd www.monpellier.co.uk

HBP Systems Ltd www.hbpsystems.co.uk