What is the contribution to dubious accounts?
Post to dubious accounts is the type of guarantee account set up many businesses. The main feature of this kind of account is to provide a pillow against any customer invoices that remain unpaid for a longer period of time. Companies usually establish a number of reserves that are maintained on the account to evaluate high -risk clients and the likelihood that these clients cannot honor these invoices.
It is important to realize that the usual function of the contribution to dubious accounts is not intended to cover outstanding balances on invoices that are currently less than six months old. Until now, efforts to collect, including attempts to develop payment arrangements with customers who have undergone some financial reversal, are usually developing. Many companies do not try to use funds in the account of dubious posts until it is determined that the unpaid balance is not likely to be a collector.
An example of when the funds can be transferred from a post to PGioacid accounts would be if the customer submitted bankruptcy protection in Chapter 7. After the notice that the customer had taken this type of measure, he had to stop any effort. This creates a situation where the company does not have the real assurance that they will sometimes be able to collect part of the debt. This is especially true if the debt is not considered to be a priority and will not be solved at all until other creditors are considered and settled in some way.
posting to dubious accounts is usually managed by creating a line item within the records of accounting companies. The exact account classification will vary depending on the prevailing accounting standards in the country where the company is established. The account is often managed as a line item within the budget operation or as a category within receivables and structured to allow easy transfer to the receivables if necessary.
While a post for dubious accounts is a common strategy used by large corporations, a small businessY can also benefit from creating this type of accounting line items. Having a clear set of instructions on when these reserves can be used is extremely important. Many businesses also make sure that at least two corporate officers can allow the transfer. Building resources for debt compensation that cannot be selected helps to ensure that the company can continue to honor its own debts, avoiding late fees or damage to the company's credit rating.