Commerce Exam > Commerce Videos > Additional Study Material for Commerce > 02- Bad Debts and Adjustments
02- Bad Debts and Adjustments Video Lecture | Additional Study Material for Commerce
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FAQs on 02- Bad Debts and Adjustments Video Lecture - Additional Study Material for Commerce
| 1. What are bad debts in commerce? |  |
Ans. Bad debts in commerce refer to the unpaid or uncollectible debts owed by customers or clients to a business. These debts are considered as losses for the company as they are unlikely to be recovered.
| 2. How do bad debts affect a company's financial statements? | |
Ans. Bad debts have a negative impact on a company's financial statements. They reduce the accounts receivable and net income of the company, as well as increase the amount of bad debts expense and decrease the overall profitability.
| 3. How can a company account for bad debts? | |
Ans. A company can account for bad debts using the allowance method or the direct write-off method. The allowance method involves estimating and recording a specific amount as an allowance for bad debts, while the direct write-off method requires recognizing bad debts as they become uncollectible.
| 4. What is an adjustment related to bad debts? | |
Ans. An adjustment related to bad debts is a financial adjustment made by a company to reflect the estimated amount of bad debts at the end of an accounting period. This adjustment is necessary to ensure that the company's financial statements accurately represent the true financial position.
| 5. How does the adjustment for bad debts affect the income statement and balance sheet? | |
Ans. The adjustment for bad debts affects the income statement by increasing the bad debts expense, which reduces the net income. It also affects the balance sheet by reducing the accounts receivable and increasing the allowance for bad debts, which decreases the company's assets.
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Dec 23, 2024 Last updated |
Video Description: 02- Bad Debts and Adjustments for Commerce 2024 is part of Additional Study Material for Commerce preparation.
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