GAP 200.035, Accounts Receivable Control Procedures

Contents

1. General
2. Internal Control Procedures
3. Bad Debt Write-Offs

I. General

Each area of Duke University having accounts receivable should establish procedures to insure that accounts receivable G/L accounts reflect net realizable receivables and to provide adequate internal control. Refer to G/L accounts 14xxxx for a list of current accounts receivable G/L accounts.

II. Internal Control Procedures

1. The maintenance of the receivable accounts and related subsidiary ledgers should be separated, wherever practicable, from the functions of (1) establishing the charges to the receivables accounts, (2) recording cash receipts and preparing the deposits, and (3) approval of any adjustments or write-off to any receivable accounts.
2. When necessary, subsidiary ledgers should be established. A trial balance of the subsidiary ledgers should be taken at the end of each fiscal period and reconciled with the related control account. Differences should be investigated and adjusted promptly.
3. All charges, collections, and adjustments to the accounts pertaining to a fiscal month should be recorded for an appropriate cut-off at the end of the fiscal period.
4. Billings to students, patients, and others should be issued in a timely manner.
5. Billing and collection transactions should be reviewed periodically to ensure compliance with established procedures.
6. Past due accounts should be reviewed monthly and follow-up collection efforts made.
7. If necessary, a reserve for doubtful accounts should be established to reflect the net collectible valuation of the related receivable account. Review procedures should be established to provide a realistic reserve based on past collection experience and anticipated losses on the receivables.
8. Requirements for approval of write-off of accounts determined to be bad debts and adjustments for disputed amounts or other items should be established.

III. Bad Debt Write-Offs

When a receivable must be written off as bad debt, follow the applicable procedure outlined below:

• If there is a reserve account for the receivable G/L account, credit the receivable G/L account and debit the reserve G/L account; subsequent collections of such items should be credited to G/L account 691100, Bad Debt Expense – Contra.
• If no reserve account has been established, credit the receivable G/L account and debit G/L account 695600, Losses, Damages, and Other Write-offs; subsequent collection of such items should be credited to G/L account 695600.