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Sagot :
To record payment from M. Simmons two entries should be passed : Debit Accounts Receivable M. Simmons and credit Allowance for Bad Debts; Debit Cash Account and Credit Accounts Receivable M. Simmons.
Write a brief note on bad debts.
When a debtor misses a payment, the creditor must declare that sum of money as a bad debt. When bad debts are present on a creditor's books and become uncollectible, they are recorded as charge-offs. Every business that extends credit to customers needs to prepare for the prospect of bad debt because there's a chance the money won't be paid back. The accounts receivable (AR) aging method or the percentage of sales method can be used by these companies to determine how much of their receivables may become uncollectible.
Bad debt can be regarded as any credit provided by a lender to a borrower that has no reasonable chance of ever being repaid, in full or in part. Any lender, whether a bank or other financial institution, a supplier, a vendor, or another entity, may have bad debt on their books. Before deciding that a bad debt is uncollectible, companies may pursue all available legal and collection options.
To know more about, bad debts, visit :
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