7 Pa. Code § 149.30
Current through Register Vol. 54, No. 25, June 22, 2024
A reserve for bad debts account must be established and maintained. In order to maintain uniformity, the bad debts reserve at month's end cannot exceed the average percentage that the actual bad debts for the preceding moving average 5-year period relates to the average actual sales for the same period. The following example sets forth the method of determining the allowable reserve for bad debts at the end of the reporting year using the preceding 5-year experience:
| YEAR | ACTUAL BAD DEBTS IN EXCESS OF RECOVERIES | NET SALES |
| 1 | $1,000 | $100,000 |
| 2 | 800 | 150,000 |
| 3 | 1,200 | 75,000 |
| 4 | 1,100 | 75,000 |
| 5 | 900 | 100,000 |
| $5,000 | $500,000 | |
| Average | $1,000 | $100,000 |
Example:
If current year's sales to customers are $100,000, reserve balance at end of year cannot exceed $1,000.
7 Pa. Code § 149.30