Identify 3 risks that can occur in estimating the amount of customer's write-off

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Identify 3 risks that can occur in estimating the amount of customer's write-off and Explain.

Nov 25th, 2014

The writing off of customer's write off impacts the company's financial statements as follows:

  • On the balance sheet, the bad debt write-off enters the account Allowance for doubtful accounts which is subtracted from the asset account. Accounts receivable.
  • On the income statement the bad debt expense normally appears along with other expenses under operating expenses, below the gross profit line. 
  • On the statement of changes in financial position (financial accounting cash flow statement), bad debt expense will be listed as a non cash expense, decreasing the total sales revenues cash contribution to net cash flow.
Hope this helps :)

Nov 25th, 2014

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Nov 25th, 2014
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Nov 25th, 2014
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