1. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 1 7100. General Accounting Procedures, 7156 Bad Debt A. The Purpose of This Policy The purpose of this policy is to describe how we post accounting entries for bad debts and allowances for bad debts. Continue ►

2. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 2 7100. General Accounting Procedures, 7156 Bad Debt B. General Manager’s Procedures When the general manager suspects that all or part of an accounts-receivable amount due is uncollectable, he or she takes the following actions: 1. Discuses the status of the account with the salesperson who handles the account. 2. If the general manager believes that there is more than a 50% chance that all or part of the amount due will not be collected, get the regional manager’s approval to notify the accountant to proceed with the steps in the following section, Accountant’s Procedures for Bad Debt. 3. If applicable, assign a collection company or attorney to attempt collection of the amount due. Continue ►

3. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 3 7100. General Accounting Procedures, 7156 Bad Debt B. General Manager’s Procedures (cont.) If there is more than a 50% chance the entire amount due will be collected, do not arrange for any accounting postings at this time. Continue to closely monitor the collection activities, and watch for any changes in the account's collection status. Continue ►

4. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 4 7100. General Accounting Procedures, 7156 Bad Debt C. Accountant's Procedure for Bad Debt We do not use a fixed percentage of revenue or accounts receivable to post as allowance for bad debt. We post bad debts and allowances for bad debts for specific uncollectable and questionable accounts receivable. To post bad debt, use the following procedures: 1. If an amount due is estimated to have a likelihood of more than 50%, but less than 100% certainty, of being uncollectable, post the following entries for the amount due: Debit: Administrative & general, bad debt (expense) Credit: Allowance for bad debt (asset) Continue ►

5. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 5 7100. General Accounting Procedures, 7156 Bad Debt C. Accountant's Procedure for Bad Debt (cont.) 2. If an amount due (that has not been previously listed as an allowance for bad debt) is determined to be 100% certain of being uncollectable, post the following entries for the amount due: Debit: Administrative & general, bad debt (expense) Credit:The appropriate accounts receivable sub-account (asset) Continue ►

6. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 6 7100. General Accounting Procedures, 7156 Bad Debt C. Accountant's Procedure for Bad Debt (cont.) 3. If an amount previously posted as an allowance for bad debt (but still listed as accounts receivable) is collected, make the following postings: Debit: The appropriate cash sub-account (asset) and allowance for bad debt (asset) Credit: Administrative & general, bad debt (expense) and the appropriate accounts receivable sub-account (asset) Continue ►

7. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 7 7100. General Accounting Procedures, 7156 Bad Debt C. Accountant's Procedure for Bad Debt (cont.) 4. If an amount previously posted as an allowance for bad debt (but still listed as accounts receivable) is determined to be uncollectable, make the following postings: Debit: Allowance for bad debt (asset) Credit: The appropriate accounts receivable sub-account (asset) 5. If an amount previously posted as bad debt is later collected, make the following postings: Debit: The appropriate cash sub-account (asset) Credit: Administrative & general, bad debt (expense) Continue ►

8. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 8 7100. General Accounting Procedures, 7156 Bad Debt D. Guaranteed No-show Write-offs Do not write-off non-collectable amounts from guaranteed no-show fees as bad debt. Reduce those amounts from the guaranteed no- show revenue account(s). End

9. FINANCIAL MANAGEMENT GUIDE © Marin Management, Inc. 9 7100. General Accounting Procedures, 7156 Bad Debt