Every school has fees that will never be collected — students who left without paying or families that became untraceable. Writing off these bad debts properly is essential for accurate financial statements.
When to Consider Write-Off
More than 180 days overdue with no communication, students who left and cannot be contacted, amounts below Rs 1,000 where collection cost exceeds amount, or cases under legal dispute.
Approval Process
Accounts identifies candidates with documentation. Finance officer reviews. Principal approves. Board is informed quarterly.
Accounting Treatment
Debit Bad Debt Expense, credit Student Fee Receivable. Maintain Provision for Doubtful Debts at 2-5% of receivables based on historical rates.
Tax Implications
Bad debts are deductible under Section 36(1)(vii) if previously recognized as income and demonstrably irrecoverable. Keep documentation.
GST Implications
If GST was charged on the written-off invoice, claim adjustment. Issue credit note and adjust in next GSTR-3B.
Prevention Strategies
Collect first month in advance, require security deposits, implement early warning alerts, and formalize the withdrawal process.
Small Balance Clean-Up
Quarterly, write off balances under Rs 500 pending 90+ days. These are rounding differences or minor unpaid amounts.
Recovery After Write-Off
If subsequently recovered, credit as Bad Debt Recovery income. Do not reverse the original write-off.
Reporting
Include in board reports: amount written off, number of accounts, reasons, and trend comparison. Healthy schools write off less than 1% annually.