Bad Debts And Provision For Bad Debts: Meaning - SS1 Accounting Past Questions and Answers - page 1
What are bad debts?
Amounts owed by a business to its suppliers
Amounts owed to a business by its customers that are unlikely to be paid in full
Expenses incurred by a business on repairing its equipment
Costs associated with shipping products to customers
What is a provision for bad debts?
A legal document that allows a business to recover its bad debts
An accounting entry that sets aside a portion of a company's revenue to cover potential future losses from bad debts
A loan that a business takes to cover its bad debts
A strategy that a business uses to avoid bad debts
What can be the reasons for bad debts?
Customers not being satisfied with the products
Customers defaulting on their payments
The business not being able to deliver products on time
All of the above
Why is a provision for bad debts important in accounting?
It helps a business to manage its cash flow
It helps a business to avoid bad debts
It helps a business to increase its revenue
It helps a business to reduce its expenses
Which of the following represents the actual losses a business incurs from bad debts?
Bad debts
Provision for bad debts
Accounts receivable
Accounts payable
Define bad debts in simple terms.
Why is a provision for bad debts important in accounting?