Difference between revisions of "Account for Doubtful Debts"

In the business world, your customers may not always pay for your goods or services immediately, and some may never pay at all. Most businesses must sell their products to customers on credit; that is, the buyer receives the product and an invoice which asks that they pay the purchase price within a set time period. Under this model, there is a risk that customers may never pay, or may only pay part of, the amount owed to you, resulting in a "default." Because they're a necessary evil of doing business, sellers should recognize these defaults as expenses and maintain an allowance for the default of these so-called "doubtful" accounts. Learning how to account for doubtful debts is simply a matter of recording the allowance in the right place and at the right time.  

In the business world, your customers may not always pay for your goods or services immediately, and some may never pay at all. Most businesses must sell their products to customers on credit; that is, the buyer receives the product and an invoice which asks that they pay the purchase price within a set time period. Under this model, there is a risk that customers may never pay, or may only pay part of, the amount owed to you, resulting in a "default." Because they're a necessary evil of doing business, sellers should recognize these defaults as expenses and maintain an allowance for the default of these so-called "doubtful" accounts. Learning how to account for doubtful debts is simply a matter of recording the allowance in the right place and at the right time.  

==Steps==

==Steps==