This chapter contains these topics:
In the French chart of accounts, a special account exists in class 4 as a subset of account 411000 - Trade Accounts Receivable. Account 416000 is used for doubtful clients and client accounts in litigation. When a bad debt is recognized, the receivable amount, including any VAT, is transferred to account 416.
When you recognize a client account as a bad debt, you create the necessary accounting entries between account 416000 - Bad Debts (Clients Douteux) and account 411000 - Trade Accounts Receivable (Clients).
To process bad debts, use one of the following methods:
G/L offset transfer
Payment status modification
Use the G/L offset transfer method to transfer invoices from the trade accounts receivable account to the bad debts account. To do this, use the chargeback procedure in the cash receipts program. When you use the chargeback procedure, you close the invoice by opening a new document (document type RB). You can manually change the G/L offset for the new document to the bad debts account (416000).
You can use this method to create one new document per invoice, or one new document for all of the invoices that you want to transfer to the bad debts account.
If you create one document for multiple invoices, you can associate bad debts with document type RB. Otherwise, it is important to keep in mind that document type RB might identify other types of chargebacks in addition to bad debts.
To further identify clients with bad debts, you can specify the credit message D (for bad debts) on the customer master record for the client. The disadvantage of this method is that the system will not include the original data relative to that client's invoices on any accounts receivable reports that you print. This might not be a disadvantage if you are accustomed to tracking this information using online inquiries.
You can modify the payment status for invoices that are considered bad debts. To do this, you must create a specific payment status code for bad debts, such as X. To further identify clients with bad debts, you can specify the credit message D (for bad debts) on the Customer Master record for the client.
If you use the payment status modification method and indicate the credit message D on the Customer Master record, you must:
Modify the data selection for your A/R Open Detail and Summary reports so that invoices identified as bad debts (with payment status X) are excluded.
Create report versions to report on clients identified as "bad debts."
Manually enter a reversing journal entry at the end of the month to offset the difference between the Trade Accounts Receivable account and the Bad Debts account. You can print this information on Trial Balance report by G/L Offset. Use data selections to include only records with the payment status for bad debts (X).
The advantage of the Payment Status Modification method is that you can maintain the information in the system relative to the original invoice, and you can easily access and update bad debt information. The disadvantages are that the setup phase is more complex, and that you are required to make a monthly manual entry. However, J.D. Edwards recommends this solution if you need to keep the original invoice information to process delinquency notices.