Account 359- Provisions for bad debts

1. Accounting principles:

a) This account is used for reflecting funding for, treatment and reversal of allowance for uncollectible accounts in accordance with laws;

b) As of the date of preparation of financial statements, microfinance institutions shall have to determine doubtful debts or uncollectible accounts in order to set aside funds for or reverse allowance for bad debts;

c) Microfinance institutions must create provisions for bad debts in compliance with regulations on the applicable financial regime. The setting side of funds for or reversal of provisions for bad debts must happen as at the financial reporting date.

– In case where a provision for bad debts that is set at the end of an accounting period is greater than the one specified in the accounting book, the positive difference between them shall be recorded as an increase in provisions and administrative expenses.

– In case where a provision for bad debts that is set at the end of an accounting period is less than the one specified in the accounting book, the negative difference between them shall be recorded as a decrease in provisions and administrative expenses.

2. Account 359 can be subdivided into tier-2 subaccounts, including:

3591- Provisions for bad debts

3. Structure and entries of the account 359:

Debit side: – Using these provisions for treating debt risks.

– Reversal of the surplus of provisions already created in accordance with regulations in force.

Credit side: – Already created provisions charged as expenses.

Credit balance – This section reflects amounts of provision against risks incurred from existing receivables of a microfinance institution.

Detailed accounting: Accountants may use one subaccount for this account.

Article 23. Account 362- Other receivables

1. Accounting principles:

This account shall be used for making latest updates on payment of debts that have to be recovered, including: Advance payments or other receivables, e.g. The deficient value of assets found without causes and awaiting resolution; receivables related to material compensations for loss or damage of raw materials, goods or capital, etc. through fault of individuals or collectives according to the decision on compensation; amounts already spent, but not approved by competent entities; deposits, pawns and pledges; receivables other than those mentioned above.

2. This account may have balances on the Credit side. The balances on the Credit side indicate that the amounts already collected are greater than the amounts to be collected.

3. Account 362 can be subdivided into tier-2 and tier-3 subaccounts, including:

Account 3621- Security deposits

This account is used for reflecting amounts that microfinance institutions leave as security deposits at other entities for use in economic, credit, etc. relationships.

Debit side: – Amounts already left as security deposits.

Credit side: – Amounts put up as security that have already been taken back or paid.

– Amounts treated by transferring them to other relevant accounts.

Debit balance: – This section reflects amounts left as security deposits at microfinance institutions.

Detailed accounting: Accountants can use subaccounts relevant to specific customers receiving security deposits.

Account 3622- Amounts lost owing to corruption or abuse of power, lost or deficient sums or assets awaiting resolution

This account is used for reflecting amounts lost owing to corruption, abuse of power, sums or assets awaiting resolution lost or deficient without cause, which await decisions on possible actions.

Debit side: – Amounts lost owing to corruption or abuse of power, lost or deficient sums or assets.

Credit side: – Amounts already collected or treated by transferring them to other relevant accounts.

Debit balance: – This section reflects amounts lost owing to corruption, abuse of power, lost or deficient sums or assets awaiting resolution, which are available at microfinance institutions.

Detailed accounting: Accountants may use subaccounts recording amounts lost owing to corruption or abuse of power, lost or deficient sums or assets awaiting resolution.

Account 3623- Internal receivables from intracompany staff

This account is used for reflecting intracompany receivables of a microfinance institution’s staff, including amounts lost owing to corruption, abuse of power, sums or assets awaiting resolution that are lost or deficient or compensations under intracompany staff’s payment obligations, and other prepaid payments, etc.

Account 36231- Compensations under the staff’s payment obligations

This account is used for reflecting receivables regarding material compensations for any loss, damage, etc. at the staff’s fault for which they are liable under existing regulations.

Debit side: – Amounts of material compensation for loss or damage at the staff’s fault of which causes are clearly defined, and which is subject to written resolution decisions.

Credit side: – Amounts already collected or treated by transferring them to other relevant accounts.

Debit balance: – This section reflects the remaining amounts of material compensation to be collected for loss or damage at fault of a microfinance institution’s staff.

Detailed accounting: Accountants may use subaccounts relevant to receivables of particular kinds.

Account 36232- Operating advances

This account is used for reflecting advances or prepayments to staff for use in provision of services and state of payment thereof.

Debit side: – Amounts prepaid for operating purposes.

Credit side: – Advances already paid.

– Prepaid amounts not used up and going back to funds.

Debit balance: – This section indicates advance amounts not yet paid by a microfinance institution.

Detailed accounting: Accountants may use subaccounts relevant to beneficiaries of these advances.

Account 36233- Prepayment of staff’s salaries and travel fees

This account is used for reflecting advance payments on salaries and travel fees to staff members, and the state of payment thereof.

Debit side: – Amounts already prepaid to staff.

Credit side: – Advance amounts already paid.

– Prepaid amounts not used up which go back to funds or are subtracted from salaries or wages.

Debit balance: – This section indicates advance amounts not yet paid by a microfinance institution.

Detailed accounting: Accountants may use subaccounts relevant to beneficiaries of these advances.

Account 36234- Internal receivables, not elsewhere classified (NEC), from intracompany staff

This account is used for reflecting debts that a microfinance institution’s staff owes, other than those already accounted for in appropriate accounts.

Debit side: – NEC amounts receivable from intracompany staff.

Credit side: – NEC amounts receivable that intracompany staff has already paid.

Debit balance: – This section reflects NEC amounts receivable that intracompany staff has not already paid yet.

Detailed accounting: Accountants may use subaccounts relevant to receivables of particular kinds.

Account 3629- NEC receivables

This account is used for reflecting a microfinance institution’s receivables other than those already accounted for in appropriate accounts.

Debit side: – NEC amounts receivable.

Credit side: – NEC amounts receivable that have already been paid.

Debit balance: – This section reflects NEC receivables that currently exist at microfinance institutions.

Detailed accounting: Accountants may use subaccounts relevant to NEC receivables.