Bad Debt Deductions

Bad Debt Deduction
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Bad Debt Deduction
Accounting is a system of recording transactions for an organization. Through accounting, financial reports can be generated. Transactions can be recorded using two accounting methods; the cash method and the accrual method. Under the cash method, revenues and expenses are recognized when cash is received or paid. This method is simple and straightforward and suitable for small organizations. By the use of the cash method, a business is able to know its available cash just by looking at revenues received and payments made. The accrual method requires that revenues and expenses are recognized when they are earned or incurred, respectively. This is the GAAP-recommended accounting method. The method ensures that a company does not understate revenues and overstate expenses. Thus, the financial statements of th...