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Why do we need an estimate of Bad Debts? Why do we have a new account, called Allowance for Doubtful Accounts? What does this account

Why do we need an estimate of Bad Debts?

  2. Why do we have a new account, called Allowance for Doubtful Accounts? What does this account represent?
  4. How are the allowance method and the direct write-off method different?
  6. Why isn't the Direct Write-Off method accepted under GAAP?
  8. How can someone manipulate (cook) the books by providing a wrong estimate?

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Estimating bad debts and using an account like Allowance for Doubtful Accounts are essential for several reasons 1 Risk Management Estimating bad debts allows a company to anticipate and prepare for p... blur-text-image

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