The Accounting Review Vol. 48 No. 4 1973
Incompatibility of Bad Debt "Expense" with Contemporary Accounting Theory: A Comment.
Abstract
The article comments on professor Joe J . Cramer's paper on the nature of bad debt expense. The classical treatment of bad debts as an operating expense is inconsistent with proper classification criteria for operating expired costs. This is so because no service is received in exchange for this cost expiration. It would seem reasonable for any treatment of the bad debts issue to include a careful statement of which aspect of the problem is being addressed. The Accounts Receivable adjustment is truly a transfer payment which should be treated as a correction of an error in revenue recognition. For those who believe that the matching convention has relevance in accounting theory, the selection between these methods has direct impact on the measure of performance for a time period. The implication of this assertion is that the selection between these methods has no impact on the information content of financial statement. The direct charge method is an example of no attempt to match. No assertion is made here regarding the appropriateness of the matching concept; however, if one accepts matching as an important accounting theory consideration (as Cramer apparently does), then the selection issue is of critical importance.
- DOI
- 10.2308/tar-4482573
- Volume
- 48
- Issue
- 4
- Pages
- 777-778
- Language
- en
- Sources
- crossref openalex