|Author||Topic: Reading 36 Q 2|
|Why is Bad Debt Expense being deducted from Sales to arrive at Cash Collected from customers. Isn't Bad Debt Expense just an estimate? What does it have to do with Cash collected? Shouldn't only increase in A/R be deducted from Sales? Please help. No previous accounting background. Trying to learn.
|I think is because Bad debt is expected as uncollectable, therefore is a reduction in the cash you get. ist like saying that you were owed 100, this month you gor paid 40,but you know that they wont pay you 10 because the personed disapeared, so now your acounts receibable is 50, but you onli collected 40 fron your customers.
hope that helps