How to Record Unallowable Bad Debt
Recording bad debt expense which is explicitly unallowable per FAR 31.205-3 and must be excluded from indirect rate calculations.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Unallowable Expense - Bad Debt | Debit | 4,500.00 | - |
| Allowance for Doubtful Accounts | Credit | - | 4,500.00 |
💡 Accountant's Note
FAR 31.205-3 states that actual or estimated losses arising from uncollectible accounts are unallowable; they must be tracked in a separate general ledger account for tax and rate-setting exclusions.
Practitioner & Systems Framework
💻 ERP Architecture
Map the 'Unallowable Bad Debt' account to a non-recoverable pool in the indirect cost engine.
⚠️ Audit Flags
Review of the G&A pool during an Incurred Cost Submission (ICS) audit to ensure bad debt is not included.
📄 Required Documentation
Detailed aged receivables report and evidence of the write-off approval.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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