Asked by Rebecca Dooley on May 26, 2024
Verified
The bad debt reserve represents:
A) money that will be paid by the company.
B) money that will be paid by customers.
C) the fact that not all receivables are collected in the normal course of business.
D) insurance against bad debts.
Bad Debt Reserve
Also known as the allowance for doubtful accounts, it represents funds set aside to account for projected losses from unpaid customer debts.
Receivables Collected
Receivables collected refer to the process of gathering or receiving payments from customers or clients against the credit sales or services provided earlier.
- Understand the concept and significance of the bad debt reserve and its impact on accounts receivable.
Verified Answer
SB
Schlindlyne BellamourMay 29, 2024
Final Answer :
C
Explanation :
The bad debt reserve is an allowance that a company creates in anticipation of customers who will not pay their outstanding balances. This represents that not all receivables will be collected in the normal course of business, and the company needs to account for this potential loss. It is not money that will be paid by the company or customers, nor is it insurance against bad debts.
Learning Objectives
- Understand the concept and significance of the bad debt reserve and its impact on accounts receivable.
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