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Under the allowance method, bad debt expense is recognized: a. when an individual account is...

Question:

Under the allowance method, bad debt expense is recognized:

a. when an individual account is written off

b. when the loss amount is known

c. for an amount that the company estimates it will not collect

d. several times during the accounting period.

Bad Debts:

Bad debts are those debts that are difficult to be paid and such debts have become the non-performing. There are various reasons for bad debts such as death, bankruptcy, fraud, cheating, poor economic conditions, etc.

Answer and Explanation:

Under the allowance approach, an expected worth of bad financial debts is obtained derived on the former experience of the company. Estimated provision needed for bad debts will be charged to profit and loss statement as bad debt expense and credited to allowance for bad and uncertain debts. When bad debts are crystallized, actual bad debts will be decreased from both accounts receivable and allowance for doubtful accounts balances.

Hence, the correct option is C.

for an amount that the company estimates it will not collect.


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Accounts Receivable Journal Entries

from Financial Accounting: Homework Help Resource

Chapter 3 / Lesson 20
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