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Bad Debts

What are Bad Debts?

Bad debts is a business expense. It occurs when customers don't pay their invoices and the business deems the debt to be uncollectible.

The business would record a bad debts expense in their income statement and reduce the accounts receivable (i.e debtors) balance by the same amount. If a bad debts expenses is recorded, it is important to ensure that the original debt is still included in income, so that the net effect of recording the bad debts expense is nil.



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