Calculation of Debts Considered Doubtful or Bad Debts

Total Secured Receivable Calculation after Consider Bad Debt

Period end Activity

Debtors should be classified as per the requirements of Schedule VI of the Companies Act 1956. At each period end the accountant should take a print of the receivables ledger, security deposits received and provision for doubtful debts. The following activities should be carried out:

Calculation of Debts in respect of which the company is fully secured

The Department should manually plot the security deposit / any other security received from debtors against the balance outstanding in the receivables ledger. If the amount receivable is greater than the amount of security, the amount of security should be considered and if the amount of security is greater than the amount due from the debtor then the amount due should be considered as secured debt. After all the amounts have been plotted in the worksheet, the total of the same should be disclosed as debts considered good in respect of which the company is fully secured.

Calculation of Debts considered doubtful or bad

The Department should prepare a reconciliation of the balance in the provision for doubtful debts at the beginning of the accounting period and at the end of the accounting period. The following format should be followed:

• Provision for doubtful debts at the beginning of the accounting period                    **** 
• Less: Debts realized (provided for earlier) during the accounting period   **** 
• Less: Debts written off (provided for earlier) during the period                  **** 
• Add: Provision for doubtful debts made during the period                                         **** 
• Closing Balance of provision for doubtful debts at the end of the period     **** 

The Department should prepare the reconciliation and forward it to the SM-S&D at HO / GM F&A for review. The amount so arrived at should be considered for disclosure under Schedule VI as debts considered doubtful of recovery

This calculation of Secured debts should be done only for the purposes of disclosure under Schedule VI. The amount of security deposit received from debtors should be shown separately in the financial statements under the head "other liabilities".