Question

Bad Debt Expense is considered __________.a. an avoidable cost in doing business on a credit basis. b. an internal control weakness. c. a necessary risk of doing business on a credit basis. d. avoidable unless there is a recession.

Answer 1

Answer:

c. a necessary risk of doing business on a credit basis.

Explanation:

Bad debt is an amount that is owed to a creditor , which will not be paid back . Bad debt expense could be as a result of company who took a loan and is not able to pay back due to bankruptcy.

Before bad debt expense occur in a business, management often make provisions for such debt. Provision for bad debt expense is an amount set aside to cushion the effect of debts that are likely not to be paid back.

It therefore means that bad debt expense is a necessary risk of doing on a credit basis.