The effect on the accounting reports of the current year of not taking into account a bad debt would be:
A)to overstate the asset accounts receivable.
B)to overstate profit.
C)Both A and B.
D)Neither A nor B.

Question

Quizplus · Accepted Answer

Not taking into account a bad debt would overstate the asset accounts receivable, as the balance for accounts receivable would include the unpaid portion of the bad debt. Additionally, it would overstate profit as there would be no reduction in revenue for the bad debt expense, leading to a higher net income.

The Effect on the Accounting Reports of the Current Year