Accountıng I Deneme Sınavı Sorusu #1313944
Which of the following is true for "bad debt expenses"?
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Bad debt expense is treated under the allowance method or the direct write-off method. |
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Bad debt expense is an income statement account that shows the losses |
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Bad dept expenses are not overstated on the balance sheet |
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Bad debt expense is not a good indicator of a company’s credit policy. |
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Bad dept expenses are not considered in account management of companies |
Bad debt expense is an income statement account that shows the losses incurred due to uncollectible receivables. It is also important to be aware of that the amount to be reflected as an asset on the balance sheet because some receivables might become bad or will be uncollectible. Hence, in order to ensure that account receivables are not overstated on the balance sheet, they are reported in their cash (net) realizable value. As mentioned before, this value deducts the amounts that the business expects it might not be able to get from its receivables. Therefore, out of receivables, the estimated uncollectible amounts are reduced and then reported on the balance sheet.
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