UPSC Exam > UPSC Videos > Commerce & Accountancy Optional Notes for UPSC > Detailed Explanation on Bad Debts Related Adjustments
Detailed Explanation on Bad Debts Related Adjustments Video Lecture | Commerce & Accountancy Optional Notes for UPSC
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FAQs on Detailed Explanation on Bad Debts Related Adjustments Video Lecture - Commerce & Accountancy Optional Notes for UPSC
| 1. What are bad debts and why do companies need to make adjustments for them? |  |
Ans. Bad debts are amounts owed to a company that are unlikely to be collected. Companies need to make adjustments for bad debts in their financial statements to accurately reflect the true value of accounts receivable and the company's financial position.
| 2. How are bad debts related adjustments made in accounting? | |
Ans. Bad debts related adjustments are typically made by recording an expense for the amount of the bad debt and reducing accounts receivable by the same amount. This helps to ensure that the financial statements provide a realistic picture of the company's financial health.
| 3. What is the impact of bad debts on a company's profitability? | |
Ans. Bad debts can have a negative impact on a company's profitability as they represent a loss of revenue that was expected but not received. By adjusting for bad debts, companies can more accurately assess their true profitability and make informed business decisions.
| 4. How can companies prevent bad debts from occurring in the first place? | |
Ans. Companies can prevent bad debts by conducting thorough credit checks on customers before extending credit, setting clear payment terms, and following up promptly on overdue accounts. Establishing a credit policy and enforcing it consistently can help reduce the risk of bad debts.
| 5. How do bad debts related adjustments affect a company's cash flow? | |
Ans. Bad debts related adjustments reduce a company's cash flow as they represent amounts that were expected to be received but are now considered uncollectible. This can impact the company's liquidity and ability to meet its financial obligations.
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Nov 24, 2024 Last updated |
Video Description: Detailed Explanation on Bad Debts Related Adjustments for UPSC 2024 is part of Commerce & Accountancy Optional Notes for UPSC preparation.
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