When a firm offers credit to customers through accounts receivable, they always run the risk that they may not receive the amount owed.

1. The payments not received are called bad debts. This week you learned about multiple ways to remove the bad debts from the accounts receivable account. Why do you think these various methods evolved? In other words, why arent all firms using Direct Write-off? If they use the Allowance method, why dont all firms use Aging of Accounts?

2. Accounting for bad debts is obviously related to the management of accounts receivable. What approaches are available to firms to help reduce the risk of bad debts?