BAD DEBTS IN THE PROFIT-AND-LOSS STATEMENT.
Under accounting theory, it should not matter whether bad-debts account is treated as a deduction from sales, a selling expense, an administrative expense, or a nonprofiting item. However, to follow this theory necessitates an admission that the detailed arrangement of profit-and-loss statement has little significance and this might lead to the idea that a simple statement of debits and credits would be sufficient. The more recent trend of thought is in favor of making corrections through the profit and loss of the period in which the error is recognized in order that the total of the periodic net profit charges will be more correct. The view is that since it is too late to change past figures, the net profit should be changed in order to make the total of the past and present profits correct as shown by the series of periodic statements. If bad debts have been calculated by a method that bases the amount of the estimated uncollectibles upon outstanding accounts, there will be little need for subsequent adjustments since all errors are automatically corrected at the end of each period and cannot accumulate from period to period.
- DOI
- 10.2308/tar-7053098
- Volume
- 16 (3)
- Pages
- 234-243
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref