When a firm writes bad debt under the allowance method of accounting for bad debts
When a firm writes bad debt under the allowance method of accounting for bad debts
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
When a firm writes bad debt under the allowance method of accounting for
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Answer
A firm generally uses, allowance for bad debts method in accounting for bad debts if it can estimate the amount of uncollectible accounts based on its past records.
Two Methods are generally used to estimate the amount of Bad debts:
- Percentage of Sales method
- Percentage of Accounts receivable based on Ageing.
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