Did you know?
Indy automatically categorizes and classifies your transactions in the right british student data accounting accounts! No more long hours spent on the Accounting Plan, now say yes to simplified accounting!
I create my account
Account 416 “Doubtful or disputed accounts receivable” is used to record accounts receivable (customers’ debts to the company) that are considered to have a relatively high risk of non-payment . This situation may arise in the event of financial difficulties and/or disputes .
When a company identifies a trade receivable at risk of non-collection, it transfers the amount of the receivable from account 411 "Receivables" to account 416 "Doubtful or disputed receivables". This makes it possible to separate the usual receivables from the receivables presenting a risk.
Account management 416 recognizes the risk that part or all of the amount owed by the customer will not be recovered. In this sense, the company may set aside provisions for depreciation of customer accounts .
When the beneficiary company permanently loses the debt, we say that the debt is irrecoverable .
Rules and regulations specific to account 416
From a tax point of view, the recording of receivables in account 416 can impact the company's taxation . Indeed, when the company sets up provisions for depreciation of these receivables, these are generally tax deductible .
The deductibility of these provisions is generally based on the reason linked to the risk of non-recovery:
Is it because of financial difficulties?
Or rather because of a dispute, ongoing legal proceedings?
