Bad debts Welcome to your Bad debts Which of the following is the most common cause of bad debt? Debtor committed a crime Debtor left the country Debtor declared to be a bankrupt Debtor refusal to repayment According to a general rule of accounting, the older a debts is outstanding, the more likelihood that the debt will turn out to be a asset for the business bad debt profitable debt for the business allowance for bad debt Which accounting concept forms the basis for recognizing expense of bad and doubtful debts? Prudence Accrual Consistency Going concern A firm has not recorded the bad debts by mistake. Which of the following is the effect of bad debts omission? Net profit would increase Gross profit would understate Net profit would decrease Gross profit would overstate When it is certain that a debt won’t be recovered. Which of the following is correct? Account receivable is credited Sales is debited Bad debts is credited Allowance for bad debt is created A recovery of bad debt: decreases net profit increases net profit increases gross profit and net profit increases gross profit Time's up
