Question

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because?

1) the accounts receivable asset should be stated at original cost.
2) the exact amount of the losses from bad debts is known.
3) revenues should be stated at realizable value.
4) all costs incurred in the current period should be subtracted from current period revenues.

Answer 1

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because revenues should be stated at realizable value.

Step-by-step explanation:

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because revenues should be stated at realizable value. Realizable value is the estimated amount that a company expects to collect from its receivables, taking into account the potential risk of non-payment by customers. By recognizing bad debt expense in the same accounting period as the revenue, a company can accurately reflect the net realizable value of its accounts receivable on its financial statements.