Bad Debts, General
Insurance
General insurance invoices will contain lines for commission and charges, which use special suspense accounts (i.e. G*CS and GXI*) as shown below. In the event of a bad debt these must be changed or their values will stay locked in your system forever. You’ll recognise most bad debts before their related commission has been transferred from the Client Bank into the Office one, and be able to treat them as described below in “Not Transferred Yet”. However, sometimes your real life bank will “bounce” a client’s cheque after you’ve transferred the commission, in which case you should follow the procedure described below in “Already Transferred”.
Not Transferred Yet
To change the nominal accounts used in a client’s invoice lines, starting from Durell’s Main Menu…
- Click the “Accounts” button
- Click the “Sales” button
- Find and double-click the invoice in question
- Highlight the first line in question (e.g. the one for “Commission”)
- Click the “Edit” button
- Ignore the warning prompt, as shown below
- Change the nominal account(s) in the line(s) as follows…
o Replace any G*CS ones, if present, to GCEA
o Replace any GXI* ones, if present, to GXIE, as illustrated below
- You can now safely contra the invoice, as described in “Bad Debts”
Not Transferred Yet - Part of a Grouped Receipt
If in real life you’ve already banked the cheque as part of a grouped receipt and it has been “bounced” by the bank then you’ll need to…
- Delete the grouped bankbook entry that contains the bad invoice from just the Bank (see “Bankbook, Deleting Entries”)
- Find the Cashbook line (n.b. which will have a double-exclamation mark) that relates to the bad invoice
- Delete the bad invoice so that it returns to the Sales Ledger, where it can then be treated as described above
- Make a new journal entry, as described in the section “Bounced Cheques”, for the total value of the bad invoice, and tick the “Make cashbook entry” for the debit side of the journal
- Find the Cashbook receipt created by this debit journal and change its banking symbol to “Will be re-grouped in bank statement”
- Redo the “Cash-up to Bank”, ensuring you click the “Re-cashup deleted entries” tick-box, as shown below
- The grouped receipt that was deleted from the bank should now have been re-instated (n.b. and should include the “Receipt” half of the “Bounced cheque” journal)
- Leave the other half of the journal (i.e. the “Payment” one) named as “Bounced cheque”
In this way you’ll have the two “bounce” related items in the bankbook, which will contra each other while also maintaining your running total. You’ll also have the original invoice back in the Sales Ledger, for which you should make a credit and contra in the Cashbook, all as described before.
Already Transferred
In the example Client Bank A/C, shown below (n.b. up to 19/11/2005) a cheque has been received from Aaron F for £387.25. The commission and fees have then been transferred to the Office Bank A/C and the insurer paid, leaving the Client Bank with a zero balance.
Then on 22/11/2005 the real life bank “bounced” Aaron’s cheque, leaving the Client Bank £387.25 in debt. To mimic such a “bounce” (i.e. the first item on 22/11/2005) you would need to create a journal like that below, taking the sum out of the Client Bank and putting it into the “Bad Debts” sales nominal account…
However this would leave a deficit of £387.25 in the Client Bank, which would have to be made-up immediately by a transfer from the Office Bank account, as per the journal shown below, which moves the required sum from one bank to the other (n.b. and would need to be matched by a real life transfer). This creates the final line dated 22/11/2005 in the illustration above, and returns the Client Bank balance to zero.
In such a case overall you’d be left with a deficit in your Office Bank account for the insurer’s premium, which you had to pay regardless. The Client Bank account would be back to zero. The system would show the commission, fees and premium you thought you had earned along with a bad debt for the whole lot, all as illustrated in the Trial Balance below.
