On the other hand, positive shareholder equity shows that the company’s assets have grown to exceed the total liabilities, meaning that the company has enough assets to meet any liabilities that may arise. Current obligations are debts that must be repaid within one year (e.g. accounts payable and taxes payable). Long-term liabilities are obligations that … Devamını oku…
Often when a company extends goods on credit, management expects some of those customers not to pay and so anticipates writing off bad debt. Allowance for doubtful accounts (ADA) is a contra asset account used to create an allowance for customers who are not expected to pay the money owed for purchased goods or services. … Devamını oku…
Bad debts recognized through this account do not reduce the accounts receivable balance of a company directly. Instead, companies use a specific account for it, known as Allowance for doubtful debts. According to accounting standards, the company must also record a bad debt allowance based on estimated amounts. When the customer repays the amount later, … Devamını oku…