Bad Debts Write Off in AR

[Shrikant Karnik]

Hi

 

I am aware that many of the studebts got confused when I ised the word as Bad Debts written off.

 

I mean to say that a customer’s transaction is outstanding for a longest period and you have no clue as to if the customer is going to pay or not, you cannot trace the customer and now you want to write-off that transaction. In other way you can treat that as Disputed amount against a Invoice. ( The debts OR dues for which chances are recovery is not Good )

It’s called Bad Debts.

How to enter bad debts in Oracle Receivables?

 

Oracle Receivable’s standard functionality:

There is no such term in Receivables as Bad Debts. Receivables suggests that you “adjust” the particular transaction. And Adjustments is type of write off that will cater your Bad Debt scenario.

These are setup and transactions steps for creating and entering Bad Debt Adjustments

Setup Steps:

1. Create a Receivables Activity with Adjustment type.  Adjustment is called a receivable activity because it write offs the outstanding balance on customer.
2. Assign Approval Limit of user to write off amounts. Obviously you cannot let anyone just write off the outstanding balance so you have to define the user’s limit.

Transaction Steps:

1. Query the transaction to write off
2. Adjust the transaction

Here are the details for Setups:

1.Creating Receivables Activity:

Navigation: AR>Setup>Receipt>Receivables Activity

1. Select the Operating Unit for which the activity is being defined.
2. Enter the Activity Name like Bad Debts Adjustments or Uncollectible Adjustemtns
3. Enter the Description (Optional)
4. Select the Type as Adjustments. Since it is defaulted for a new setup so move on.
5. Let the GL Account Source as Activity GL Account
6. Select Tax Rate Code Source as None.
7. Enter the Expense Account in Activity GL Account.
8. Save the Setup

2.Assign the Approval Limits:

Navigation: AR>Setup>Transaction>Approval Limits

1. Query the User Name
2. Select the Document Type as Adjustment
3. Enter the Currency, in case multiple currencies are used
4. Enter the From Amount. This value should be in negative, as the adjustment amount will be -ve of the invoice amount.
5. Enter the To Amount. Do I really need to tell that it should be greater then From Amount?
6. Leave Primary Check box uncheck as it does not relate to adjustment
7. More Tabbed region also does not relate to adjustments.
8. Save the Approval Limit

With this our Bad Debts or Transaction Write-Off is ready to work

The question remains about how to use this adjustment?

As we discussed in the classroom, Query the transaction you want to write off. The Transaction should be Complete. Now do the following

1. Go to Action Menu and select Adjust
2. Select the Activity Name you’ve created for Bad Debt or Write-Off
3. If the whole transaction amount needs to write-off then select Type as Invoice. If partial amount needs to be write-off then select Line.
4. If you select Type as Line then you have to enter the negative amount to be write-off otherwise for Invoice Type the whole outstanding amount comes in automatically.
5. You have to create the accounting of adjustment separately or run the Create Accounting Report

When you save the transaction the outstanding amount is write off and following Account Entry is created for Adjustment

Activity GL Account / Adjustment  

(Bad Debts Written Off A/c)                        DR

Receivables   (Customer A/c)                                           CR

You can try Auto Adjustment in case of adjustment of multiple Invoices in a single process. Auto Adjustment will allow you to enter multiple parameters.
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Shrikant Karnik

http://www.opinegroup.com