Legal debtors

When a debtor enters litigation, a separate process starts for bad debt provision or write-off. All items for the customer's account are transferred to a legal status within accounts receivable. A general ledger journal is effected between trade debtors and legal debtors.

A provision for doubtful accounts, or bad debt reserve, is created as a reduction in accounts receivable. Bad debt reserve shows the value a company anticipates as being uncollectible.

When a customer’s debt is written off, the open items are cleared by posting their amount to the GL write-off account.

France specifics

When in dispute, open item transactions are transferred from the Plan Comptable Général (PCG) Trade Debtors (411000) account to the Legal Debtors account at year-end. Orders are still recorded against 411000.

For items that are moved between 411000 and 416000, the VAT basis of those items, accrual or cash, must also be transferred.

We recommend that your accounts receivable (AR) system supports different control accounts within the same AR customer account.

How Infor meets this requirement

Because this situation does not happen often, it is handled manually. In general, this process can be used:

  • Sales canceled by posting 7xx (sales account) against 654 (loan loss account).
  • Customer canceled (debtor) by posting 411 (customer account) against 416 (doubtful customers account).
  • VAT canceled by posting 4457 (taxes collected account) against the same 4457 (taxes collected).

Depending on the situation, the posting process could be more complex or use other accounts.