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Bad Debts & Allowance for Doubtful Accounts

To increase sales, a company may choose to extend credit to a customer.  At some point in time, the customer may be unable or unwilling to pay an outstanding invoice (i.e.: Bankruptcy).  Once it is apparent that the company will not receive the funds, a Bad Debt must be recorded.


This level includes:

  • Direct Method of recording a bad debt
  • Setting up an Allowance for Doubtful Accounts
  • Allowance Method of recording a bad debt
  • Year end adjustment of Bad Debts or Allowance Accounts

The exercises are the same, but with different amounts.

The Supplemental Information is designed help further your understanding of the material.  If you are having trouble with the exercises, take a look at this material.