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What is the "Specific allowance" and "General Allowance" for Doubtful debts?

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Question added by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.
Date Posted: 2014/10/28
Muhammad Salman Jahanzeb
by Muhammad Salman Jahanzeb , Assistant Manager Accounts , Prudent Accountants

General allowance are created on the estimate that a certain part of our recievables will not be recovered. They are created on the basis of historical annalysis of recievables. Due to the subjectivity involved in their creation they are no longer allowed under IAS39.

 

Specific allowance are created in regards to the financial position of a certain debtor of ours. For example one of our debtors might be facing liquidation problems and thus a specific allowance can be created in regards to the specific debtor.

 

Mohammed Salim Allana
by Mohammed Salim Allana , Compliance and Assurance Manager , United Arab Bank

General allowance also called as general debt provision which is based on a percentage applied on the amount of debt overdue loans up to90 days and above..

 

While specific allowance is created for each specific corporate customer based as proposed by the Credit Risk committee or as per regulatory risk guidelines.

Arif Hussain
by Arif Hussain , Accounts Payable , Pakistan

Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts Receivable the result is known as the net realizable value of the Accounts Receivable.

The credit balance in this account comes from the entry wherein Bad Debts Expense is debited. The amount in this entry may be a percentage of sales or it might be based on an aging analysis of the accounts receivables (also referred to as a percentage of receivables).

When the allowance account is used, the company is anticipating that some accounts will be un collectible in advance of knowing the specific account. As a result the bad debts expense is more closely matched to the sale. When a specific account is identified as un collectible, the Allowance for Doubtful Accounts should be debited and Accounts Receivable should be credited.

Malik Khalid Mahmood
by Malik Khalid Mahmood , Regional Finance Manager , Leosons International FZ LLC

General Allowance is5%, if more then its specific allowance

Khaled Mohee Eldeen Abbas Mahmoud
by Khaled Mohee Eldeen Abbas Mahmoud , Chartered Accountant # 10465 , Self-employed

I gree with the answers provided

georgei assi
by georgei assi , مدير حسابات , المجموعة السورية

Agreed with colleagues answers

Ayyub khan Ibrahim Khan Deshmukh
by Ayyub khan Ibrahim Khan Deshmukh , Finance Manager , Ahmad Al-Sarraf General Trading & Contracting Est.

specific allowance created in respect of specific receivables which are known to be facing serious financial problems or have a trade dispute with the entity &The general allowance may be calculated on the basis of past experience concerning recoverability of debts.

Ayman Esa Mustafa Farrag
by Ayman Esa Mustafa Farrag , مدير مالي , شركة الصفوف

A gree with all answers 

Abdallah Abu Zeyad CMA
by Abdallah Abu Zeyad CMA , Finance Account Manager , Toyota - Abdul Latif Jameel Motors - KSA

Totally i am with Mr. Mohammad salman answer.

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