Bad loans also known as uncollectible costs from an asset (subtracted from the balance sheet) is considered. Contra asset increases with credits and debits and decreases have a credit balance. Bad debt is an expense account, that the claims should not be brought by a company represents. offered discounts to customers to encourage prompt payment. If a customer pays an invoice within a specified period, normally 10 days, offered a discount determined that 2 / 10, that if the account is paid within 10 days, the customer receives a discount of 2 per cent means. Other credit terms offered could n30 that the full amount, means: Must be paid within 30 days. Discounts are in the profit and loss account as a deduction from revenue collected.
Banks and other financial institutions to lend to the experience or losses on the loans they have to give the customer. As the country experienced during the credit crisis, banks issued mortgages to clients who do not pay for loss of employment or other facts surrounding the circumstances of the time their mortgages. Therefore, mortgage loans were repaid and foreclosure crisis caused banks to take back possession of houses and losing money. For better coverage of losses, which help to guarantee bank accounts of the bank lending detail at the end of each month or cycle for a mortgage bank report. These arrangements include the credit risk management, banks created a reserve for losses on loans and provisions for losses on mortgage loans. Lenders also have a mortgage debt (assets). By definition, a mortgage is a loan (money borrowed at interest) the borrower uses to buy goods such as home, land or building, and there is an agreement with the borrower to repay the loan and the loan is paid off monthly rates for certain years indicated .
To save the mortgage transaction debits the accounting change the account of the mortgage and credit markets, the Treasury. The cash credit, the account balance decreases. If the borrower’s mortgage, the transfer prices of non-performing loans and mortgage loans. Mortgage loans are recorded as non-current assets in the balance sheet. The provision for credit losses in the profit and loss statement. Having a bad debt expense in the same year in which the mortgage is known, is an application of the matching principle.
