Question

On december 31 of the current year, techcom's unadjusted trial balance included the following items: accounts receivable, debit balance of $107,250; allowance for doubtful accounts, credit balance of $1,900. what amount should be debited to bad debt expense, assuming 6% of outstanding accounts receivable as of december 31 of the current year, are estimated to be uncollectible

Answer 1

$4,535  amount should be debited to bad debt expense.

What is bad debt expense?

When a receivable is no longer recoverable because a customer is unable to fulfill their responsibility to pay an outstanding debt owing to bankruptcy or other financial troubles, a bad debt expense is reported.

Big Store stops paying its debts and fails to reimburse Company XYZ for $100,000 in items. Because the company is not convinced that Big Store will ever pay, the $100,000 is classified as a bad debt.

Because it reduces the amount of an asset, in this case accounts receivable, an allowance for doubtful accounts is considered a "counter asset."

As the amount is not a liability, bad debts are an expense to the business.

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