Bad Debts Expense is considered
A) an avoidable cost in doing business on a credit basis.
B) an internal control weakness.
C) a necessary risk of doing business on a credit basis.
D) avoidable unless there is a recession.

Question

Quizplus · Accepted Answer

Bad Debts Expense is a necessary risk of doing business on a credit basis because there is always a chance that customers may default on their payments, and the company must be prepared to write off those accounts as losses. While companies can take steps to minimize the likelihood of bad debts, such as conducting credit checks and setting credit limits, there is no guaranteed way to completely eliminate the risk. Additionally, bad debts may occur even in a strong economy, as unexpected events can cause individual customers or entire industries to experience financial difficulties.

Bad Debts Expense Is Considered