Question

Accrual accounting requires that the cost associated with the failure of credit customers to pay their bills should be recorded as an expense in the period when:_____________

Answer 1

Accrual accounting requires recording the cost associated with the failure of credit customers to pay their bills as an expense in the period when it is probable that the payment will not be received.

Step-by-step explanation:

In accrual accounting, the cost associated with the failure of credit customers to pay their bills should be recorded as an expense in the period when it is probable that the payment will not be received, and the amount can be reasonably estimated. This is known as the allowance for doubtful accounts. It is necessary to recognize this expense to match it with the revenue generated from the credit sales.

For example, if a company estimates that 5% of its credit sales will not be paid, and it has $100,000 in credit sales for the period, it would record an expense of $5,000 ($100,000 x 5%) in the same period.

It's important to note that the actual bad debts may differ from the estimated amount, and adjustments may need to be made in subsequent periods.

Answer 2

Step-by-step explanation:

Failure of credit customers to pay their bills is considered a bad debt in Accounting. This is recored as a bad debt expense in journal entries in the period when the credit sale occurred. This ensures that these bad debt expense matches the revenues earned during that period. In a company's financial statements, bad debt expense is recorded in the Income statement as selling expenses.