Features of the Genesis of the Concept of Doubtful and Bad Debts, Organization of their Accounting and Assessment, Creation of a Reserve

Abstract

The problem of defining the concept and content of doubtful and bad debts as well as the possibility of improving their accounting and creating a reserve is considered. Further steps to disclose the essence of the concept, qualitative characteristics of doubtful and bad debts under modern economic conditions, to ensure identification and cognition of accounting processes are taken; the debt in value terms is considered; reasons for its depreciation over time are identified, providing for the recording of transactions in accordance with their essence and not only on the basis of legal form. Methods of calculating, accumulating funds to create a reserve for the repayment of doubtful and bad debts and organization of their accounting are scientifically studied; recommendations on improving the accounting of the debt reserve when using various ways of its reflection in the balance sheet, accrual by journal entries and writing off by means of the documents “Debt adjustment” are given. Characteristics of methods for calculating doubtful debts are presented, examples of the mechanism for calculating the amount of the reserve are considered. The conclusions drawn are that the choice of the method strongly influences the final indicators, because using any method of calculating the reserve we receive different amounts of it, which changes the situation for the worse. In the course of the study, differences in approaches to the valuation, writing off and formation of a debt reserve are revealed as well.

Keywords

• doubtful debts
• bad debts
• accounting
• debt reserve
• management
• risk