Previously owed loans may be considered bad debts, but sometimes companies can also recover previously owed loans. So how should the accounting treatment of previously owed loans be done?

Accounting entries for payment owed before receipt

Debit: bank deposits

Credit: accounts receivable

Confirmed bad debts Loss reversal:

Debit: Bad debt provision

Credit: Credit impairment loss

What are accounts receivable?

Accounts receivable refers to the amount of money that an enterprise should collect from the purchasing unit due to the sale of goods, provision of labor services, etc. in the normal course of business operations, including but not limited to the amount due from the purchasing unit or the receipt of labor services. Taxes borne by the unit, packaging fees, and shipping and miscellaneous fees paid in advance on behalf of the purchaser. In addition, in the case of sales discounts, factors such as commercial discounts and cash discounts should also be considered.

Enterprises should collect accounts receivable in a timely manner to make up for various expenses incurred by the enterprise in the production and operation process and ensure that the enterprise can continue to operate.

For accounts receivable that are truly irrecoverable and meet the conditions for bad debts, they should be dealt with as bad debt losses after obtaining relevant certificates and submitting them for approval in accordance with the prescribed procedures.

The "Accounts Receivable" account is an asset account. The debit side represents the increase in accounts receivable, and the credit side represents the recovery of accounts receivable and the recognized bad debt loss (i.e., the decrease). If the balance at the end of the period is on the debit side, it represents the accounts receivable that the company has not collected yet; if the balance is on the credit side, it represents the amount received in advance by the company.

It should be noted that for enterprises that do not set up a separate "Accounts Receivable in Advances" account, the accounts received in advance can also be accounted for in the "Accounts Receivable" account.

How to understand bad debt provision?

Bad debts are receivables that cannot be recovered or are extremely unlikely to be recovered by the company. Bad debt provisions are based on the company's receivables (including but not limited to accounts receivable and other receivables) Provision for allowance account.

The "Bad Debt Provision" account is an asset account and is used to calculate the bad debt provision accrued by the enterprise. The credit side reflects the amount of bad debt provision accrued in the current period, indicating an increase in bad debt provision, and the debit side reflects the actual amount of bad debt losses. and the amount of bad debt provisions written down, indicating a decrease in bad debt provisions. The ending balance is generally on the credit side, reflecting the bad debt provisions that the company has accrued but not yet written off.