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Bad and Doubtful Debts

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    Wendy C.
    AU
    Wendy C.

    Balance day adjustments is where Bad and doubtful debts are recorded.

    Anton A.
    JM
    Anton A.

    How bad and doubtful debts affect the balance day adjustment s?

    Samuel F.
    ZA
    Samuel F.

    What is the difference between bad debt and doubtful debt?

    Samuel F.
    ZA
    Samuel F.

    Some people will use these terms or account titles interchangeably: Bad Debt Expense, Doubtful Account Expense, Uncollectible Account Expense. The same for these terms or account titles: Allowance for Bad Debts, Allowance for Doubtful Accounts, Allowance for Uncollectible Accounts. The "Allowance for ..." is a balance sheet account. However, it is a contra account to the asset Accounts Receivable. (Generally, the Allowance account will have a credit balance—whereas Accounts Receivable and other asset accounts normally have debit balances.) The Allowance account communicates to the reader of the balance sheet the amount of Accounts Receivable that will likely not be collected. The three Expense account titles listed above are income statement accounts and will have the usual debit balance. These expense accounts report how much bad debt expense was incurred during the period shown in the heading of the income statement.

    Harrison A.
    AT
    Harrison A.

    The allowance for doubtful accounts is used when bad debt expense is recorded prio to knowing the specific accounts recievable that will be uncollectable . e.g, a company might have 500 customers purchasing on credit and they own the company a total of €1.000,000 .The €1,000,000 is reported on the company's balance sheet as account receivable.The organisation does't know specifically which customer will not pay , but it estimates that a few custmers out of the 500 will not be paying the full amount they owe .The company estimates that €10,000 will not be collected.Rather than waiting until those specfic customers are identiied,the company makes an acounting entry that bad debts expense and credits allowance for doutful accounts . The amount of the entry will be the amount necessary to get the ending balance in the allowance account to be a credit of €10,000 .when the balance sheet is prepared , it will show accounts receivable of €1,000,000 less the allowance of €10,000 for a net realizable value of €990,000 the amount that will likely be turned into cash . The entry also meant that the income statement will be reporting €10,000 of bad debt expense sooner than if the company waited for the customers to admit they were not able pay.This means that the expense is matched more closely with the revenues the goal of accountings matching principle .

    Harrison A.
    AT
    Harrison A.

    What is the purpose of the allowance for doubtful accounts ?

    Zachary B.
    US
    Zachary B.

    What are bad and doubtful debts?

    Zachary B.
    US
    Zachary B.

    What are bad and doubtful debts?

    Diamond T.
    US
    Diamond T.

    Some people will use these terms or account titles interchangeably: Bad Debt Expense, Doubtful Account Expense, Uncollectible Account Expense. The same for these terms or account titles: Allowance for Bad Debts, Allowance for Doubtful Accounts, Allowance for Uncollectible Accounts. The "Allowance for ..." is a balance sheet account. However, it is a contra account to the asset Accounts Receivable. (Generally, the Allowance account will have a credit balance—whereas Accounts Receivable and other asset accounts normally have debit balances.) The Allowance account communicates to the reader of the balance sheet the amount of Accounts Receivable that will likely not be collected. The three Expense account titles listed above are income statement accounts and will have the usual debit balance. These expense accounts report how much bad debt expense was incurred during the period shown in the heading of the income statement.

    Douglas R.
    US
    Douglas R.

    Debts need to be repaid.

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