Provision Fund for Bad Dept

Provision Fund for Bad Dept

Regardless of accounting policies a company may have, Japan Tax Code has severe limitations on what they allow as provision fund for bad debt in dealing with accounts receivable. Depending on the status of legal liquidation, limit is decided. The most common legal proof is notice from lawyers and court which states the condition of debtor. The date of this notice will determine the timing of allowing a provision fund for bad debt. Usually, this notice from lawyers and court are received by the sales personnel. Guidance to sales personnel to pass this notice to the accounting personnel in charge will be essential for timely process. You should always consult with the tax accountant on the timing and conditions when making provisions for bad debt.