Allowance For Doubtful Accounts | Bad Debt Expenses | FINANCIAL ACCOUNTING BASICS

📊 Allowance for Doubtful Accounts Receivable Explained 📊
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In this video, we dive into how businesses manage their Accounts Receivable and the importance of setting aside an Allowance for Doubtful Accounts. Understanding how to categorize debts based on age and applying different percentages to estimate potential losses is crucial for accurate financial reporting!
🔑 Key Points Covered:
What is Accounts Receivable? 💵
Money owed to the business from customers after sales made on credit.
Why Do We Need an Allowance for Doubtful Accounts? ⚖️
Businesses may not always recover what they’re owed, so it's important to account for this!
Grouping Receivables by Age 📅
Receivables are split into groups based on how long they've been outstanding. For example:
Less than 30 days 🗓️
30-60 days 📆
60-90 days ⏳
Over 90 days 🕰️
Applying Different Percentages 📈
As receivables age, they are more likely to become uncollectible, so higher percentages are applied to older debts to calculate the potential loss.
Impact on Financial Statements 💼
Learn how companies ensure their balance sheet reflects realistic values by adjusting for these doubtful debts!
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