SOP For Allowance For Doubtful Accounts
SOP Number: Finance and Accounting – 21
Department: Accounts Receivable
Date Issued: 8-Aug-2021
Time to Train: 25 Minutes
Purpose of Allowance For Doubtful Accounts :
Allowance For Doubtful Accounts SOP Procedures:
ALLOWANCE FOR DOUBTFUL ACCOUNTS
There will be, from time to time, accounts receivable accounts which will be deemed uncollectible. These accounts will be charged to the Allowance for Doubtful Accounts or to the departmental bad debt expense.
A. If all hotel credit procedures and company policies have been followed and the account is deemed uncollectible, the account should be written off to the Allowance for Doubtful Accounts.
B. If an account is transferred to City Ledger and is not billable, the Accounts Receivable Supervisor will make every effort possible to obtain a billing address. In a case where it becomes impossible to bill the account, it will be written off and charged to the bad debt expense of the department which was responsible. Examples of this would include walkouts, non- readable credit card imprints. CIA's, etc.
Also, if a policy is violated and the account is billed but not collected, the account will be written off and charged to the bad debt expense of the responsible department.
C. Accounts Receivable write-offs should be documented as to reason, including comments of appropriate department. All write-offs and adjustments, including credit card rebates, must be approved by the department head. Controller, and General Manager.
D. Accounts are to be written off when they are determined to be uncollectible, but in no case are they to be retained on the books beyond 180 days.
Unidentified credit balances in the 180 day age category are to be written off as a credit to Allowance for Doubtful Accounts.
Except for items previously written off to a departmental bad debt expense, all recovery of Bad Debt previously written off are to be credited to the Allowance for Doubtful Accounts. Recovery of items written off to a departmental expense should be credited to the expense where it was originally charged
Training Summary Questions:
Q1. What is the write-off policy for accounts receivable?
Q2. What happens if an account is transferred to City Ledger and is not billable?
Q3.Who should approved all write-offs and adjustments, including credit card rebates?
Q4. What is the criteria for writing off bad debt expenses??