Bad and Doubtful Debts Flashcards
1
Q
When is a debt written off as bad
A
When the business has confirmation that the customer is unable to settle their debt due to bankruptcy or liquidation, the business will decrease the A/C Rec and thus increase the bad debt expense
2
Q
What is a doubtful debt and why does the business need them
A
The business uses the doubtful debts account to estimate the amount of A/C Rec that they believe will be written off as bad debts in future periods in order to uphold the accrual basis assumption
