Question

The ____________ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.

Answer 1

The answer is write-off method.

Step-by-step explanation:

In accounting, a write-off is a way of reducing the value of an asset e.g accounts receivable.

If a debt cannot be repaid back or cannot be collected again due to bankruptcy of one of its customers, then the accounts receivable need to be written off for the amount of that debt.

For example, a business has a total of $100 million as its accounts receivable balance. Due to the bankruptcy of one of its customers, it is estimated that $5million cannot be collected back again.

In this example, the write off is $5 million and it reduces the accounts receivable of $100 million by this amount, making the new accounts receivable to be $95 million ($100 - $5) million