For many people, an account with bad debts written off is like a death sentence. This is because they know very well that bankruptcy cannot be used to solve the problem. They also know that the only way of repaying the amount is by declaring themselves bankrupt. But this is not the end of the story. You can still find out the extent of your bad debts by using the provisions of the debt relief services.
The first thing to do is to calculate the current assets and current liabilities. It would be wrong if you think that calculating bad debts accounting is just a piece of cake. You have to go through each and every single transaction you have made in the financial year ending last September. You cannot afford to miss even the most insignificant transaction as it may be the beginning of your financial year. The calculation is time consuming and will take a lot of effort on your part. In such a scenario, it makes sense to use the services of a professional to do this task for you.
There are different methods to determine whether your debts are good or bad debts. Some of these include looking at the income and expenditure account. If the latter includes any debit which is higher than the income, then there are chances of your being in a bad debt situation. The calculation for bad debts accounting will take into consideration all your debit items including the money you spent on rent, electricity, gas, car maintenance, food, recreation etc. You will be able to know how much excess cash you still have left after covering all your expenses.
If you know the total amount of bad debts accounting you have incurred and still have some money left, then you can easily use the bad debt is good debt calculator. This is an online tool provided by different finance firms which helps you determine whether your current financial position is in a bad debt situation or not. With this calculator, you will be able to plug in your personal information and also the details of your creditors. The good thing with this bad debts accounting tool is that you will be able to get an estimate based on which you can easily determine how much your next repayment should be. You can even use this calculator as many times you want.
Once your income statement is ready, you should go through the report carefully. You should look out for all the debit items which you have paid off but which still have an outstanding balance against your name. These include credit card overdrafts, recent utility bills, bank overdrafts, and even store cards that you may have used for shopping. The income statement is your complete financial statement and it gives details of all your financial transactions made so far. Once your bad debts accounting has been completed, you can easily calculate your next repayment.
You will be able to deduct your expenses from your current income as well as your previous financial year’s income. This way, you will be able to calculate your next direct write-off expense. With the direct write-off expense, you can deduct expenses that are related to your direct business interests such as rent or mortgage interest. This will be helpful if you are planning to buy property in future. However, you should remember that if you have any business assets, you have to include them in your next direct write-off expense in order to depreciate your capital assets.
Your next step is to subtract your total amount of doubtful accounts from the total amount of your current income. Then you should multiply your total doubtful account balance by the percentage of your income which is minus your allowance. Your allowance is the total amount of money that you have actually deducted from your income for other purposes. If you are confident about how much of your business assets should be included in your allowance, you can just enter a figure in the blank field. However, you should remember that you should not include your personal assets or the personal effects in your allowance.
Your next step is to add up all your net debits and your net credits. The accountancy test will be based on the net debits and credits more than the net revenue that you have in your business. If your business has been established for at least two years, your net debits and credits should be at least five thousand dollars. In addition, you must pass the accountancy test in order to be allowed to take the Bd 1 exam.