"Other receivables" are advances, provisional payments or deposits made by the enterprise. In general, it has nothing to do with the income of the enterprise. The object of other receivables can be the company's shareholders, internal employees, partners, subsidies, etc. Since "other receivables" involve business income, according to the standards and tax law, other receivables should not have bad debts and will not involve the problem of flat accounts. However, in practice, it is difficult for an enterprise to avoid the unrecoverable "other receivables" when the "other receivables" cannot be recovered. However, "other receivables" that cannot be collected shall be treated as follows:
Accounts with upstream and downstream enterprises, except for deposits and compensation, rarely appear in "other receivables".
Tax Risk:Long-term "other receivables" will not bring tax risks to the listed enterprise. However, other receivables that have been confirmed to be unrecoverable and not carried forward will bring income tax burden to the enterprise.
Unrecoverable carry-over entries:
Borrow: Non-operating expenses - liquidated damages.
Credit: Other Receivables - XX Enterprises.
Closing Certificate:Proof of payment by the other party, contract with deposit clause, and proof of deduction of liquidated damages by the other party.
Other receivables between enterprises.
The "other receivables" generated by enterprises and natural persons are mostly advanced payments by enterprises on behalf of natural persons, and if the natural persons do not return them for a long time, it is equivalent to a disguised increase in the income of the natural person.
Tax Risk:The "other receivables" of natural persons who have been on the books for a long time will be suspected of the risk of paying and withholding individual income tax. It is easy to be identified by the tax department as a disguised transfer of benefits, and the transfer of interests to natural persons requires enterprises to pay and withhold individual income tax.
Unrecoverable carry-over entries:
Borrow: Credit impairment loss Non-operating expenses.
Credit: Other receivables - xx persons.
Carryover vouchers:If there is a bad debt in the "other receivables" between the enterprise and the natural person, there must be strict vouchers. Such as: collection records, court judgments, materials on the other party's refusal to perform obligations, etc. The "other receivables" of natural persons without sufficient supporting materials shall not be carried forward into bad debts, and the forced carry-over of bad debts shall not only not be deducted before tax, but also need to pay individual income tax for natural persons.
Since the legal person (shareholder) has control over the enterprise, at the legal level, the shareholder (legal person) is not allowed to occupy the enterprise's funds and use them for their own affairs. According to the rules and regulations, there should be no "other receivables" between shareholders and enterprises. However, in practice, it is more common for shareholders to misappropriate funds, and in many cases, it is not actually misappropriated by shareholders, but temporarily placed in the name of shareholders for the purpose of simplifying accounting processing.
Tax Risk:Shareholders (legal persons) should not have other receivables posted for more than one year. Because the "other receivables" that have been on the books for a long time will be suspected of the company's transfer of benefits to shareholders, resulting in the shareholders in essence paying more dividends or "evading the registered capital".
Settle accounting entries
Borrow: Bank deposit.
Credit: Other receivables.
ps：For the "other receivables" generated by shareholders (legal persons) and enterprises, only the return of this entry is legal, and this part of the funds cannot be possessed for a long time, nor can it be discounted in kind. As an accountant, when the end of the year is approaching, you must first ask the shareholders to repay the arrears, even if the shareholders still need the funds temporarily, they need to return them first and then lend them out. Try to reduce the age of accounts to less than one year.