Bad and Doubtful Debts Flashcards Preview

Accounting U4 AOS 2 > Bad and Doubtful Debts > Flashcards

Flashcards in Bad and Doubtful Debts Deck (2)
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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