How do you configure bad debts in FI module?

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The procedure for Bad debt configuration:-

Define Methods: SPRO / Financial Accounting / Accounts Receivables & Payables / Business transactions / Closing / Valuate / Reserve for bad debts 
- OB04
- Double click define methods
- Select New entries button

Prov     Period     Months     Percent1     M     Percent2     M     Percent3     M     Percent4
SAI          1            10              2           20          3           30         4          100
Save
Creation of Bad Debts Account: FS00

Co.code: XXXX 
- Select with template button  G/L A/c:XXXXXX    Co.Code : XXXX
Account group: Administration 
- Select P & L Radio button
Short text: Bad debts    Long text: Bad debts 
- Select control tab button     Current currency: INR
- Select only local currency check box 
- Select line item check box,  Sort key:001  Field status variant: G001 
- Save

Define Accounts for Reserve & Bad Debts: 
- OBXD

SPRO / Financial Accounting / Accounts Receivables & Payables / Business transactions / Closing / Valuate / Define Accounts for Reserve & Bad debts
Chart of Accounts: XXXX

PROVISION METHOD     DEBIT     CREDIT
       XXX     XXXXXX      XXX        XXX 

Select rules tab button  Accounts are determined based on 
- Select      Debit/Credit    check box 40/50
- Select provision method check box
- Save

Special G/L Account: 
- FBKP

Double click Special G/L
Account Type     Special G/L     Special G/L Indicator     Description
   D          E          Reserve        Reserve for Bad debts

Double click Reserve 
- Chart of Accounts: SAI (Enter)
Account Assignment 
Reconciliation A/c:XXXXXX (SD)    Spl.G/L-XXXXXX               Save

Receivable Transfer posting (Gross):
- F103

Accounting / Financial Accounting / Accounts Receivable / Periodic processing / Closing / Value / Receivable transfer posting (Gross) 

Customer A/c:XXXXXX          Provision method: XXXX
Special G/L Indicator for Debit Rec: E (Reserve for bad debts)
- Select create batch input session check box 
- Batch input session name: SAPF103 
- Posting Key:09  Posting document: DA 
- F8
From the menu Select -> System -> Batch Input -> Session
- Select batch input session: SAPF103    Select process 
- Select display errors only V 
- Select process button 
- Exit Batch input

Reserve for bad debts (Gross):
Customer A/c:XXXXXX  Co.Code: XXXX G/L Account: XXXXXX  Co.code:  XXXX
Accounts group: reserves and surplus 
- Select balance sheet option button
Short text: Provision for Bad Debts  Long text: Provision for bad debts
A/c Currency: INR  Rec.Accounts for account type: Customer
- Select line item display check box
Sort key: 031  Field status group: G067 
- Save

Related:

• What is Debit note and Credit note
• Sample Account Assignment in G/L Account
• Configuration Steps For Preparation of GL A/C
• Integration of FICO with Other Modules
• Questions and Answers for SAP Financial

SAP FI Books
SAP Financial and Controlling Certification, Interview Questions and Configurations Reference Books

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SAP FI/CO Tips and Financial Accounting/Controlling Discussion Forum

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