332 Other (Reserves)

Liabilities

Long Term

Synopsis

Account 332 is established to record other reserves for potential losses, which can reasonably be anticipated. For example, when notice is received that a company owning the dealership files for bankruptcy, the monies owed may end up in default. The potential loss should be set up as a reserve in this account.

Debits

Credits

The amount of write off related to debts credited to this account

The amount of potential losses outstanding from debtors who have indicated that payment is unlikely

Example 1

Record the monthly provision of $3,000 for estimated repossession losses from the sale of new and used vehicles. The new vehicle provision is $2,000 and the used vehicle provision is $2,000.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 853	Repossession Losses – New	$2,000
Account 854	Repossession Losses – Used	$1,000
Account 332	Other Reserves		$3,000

Example 2

Record the payment of $15,268 to the Financial Institution for a repossessed car, which has an ACVof $12,000.

Journal: Cash Disbursements

Entry:		Debit	Credit
Account 240	Inventories – Used Cars	$12,000
Account 332	Other Reserves	$3,268
Account 202	Cash in Bank		$15,268

Comments

This account is provided to show extraneous reserves, which might be necessary, such as reserves set up for anticipated losses on notes receivable that have be subject to forfeiture by finance institutions or other providers.

Note:

As an example, in recent history, several privately owned extended warranty firms have gone out of business while still owing claim payments to dealers.