Publisher's Synopsis
This historic book may have numerous typos and missing text. Purchasers can usually download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1896 edition. Excerpt: ...or will probably arise, through the failure of any of our customers to meet their financial obligations in whole or in part. The most primitive method of treating bad debts is, as soon6 as a debt shows decided symptoms of being bad or indifferent, to write it off, or any portion, direct to Profit and Loss Account (or Bad Debt Account, which is a part of Profit and Loss Account); that is, credit the debtor to balance, and debit Profit and Loss Account. But a more scientific way is to open an account called "Bad and Doubtful "Debts," and, as soon as a debt becomes at all uncertain, transfer tbe whole amount to this account, "where it remains as an asset with other amounts of a like nature. But to make the position correct, an artificial liability is created called "Reserve for Bad Debts," and made equal in amount to the whole of the Bad and Doubtful Debt Account, or equal to such proportion as is thought fit. When any of the debts become absolutely hopeless we can write the amounts off against the Eeserve. Take an example: --Dr. Bad And Doubtful Debt Account. Or. Under the first method of treatment we must lose sight of doubtful debts, or else retain them as assets for some con siderable time after they have become all but worthless; but under the second method we have the amounts kept in view, are more likely to see to their recovery in time, and can better estimate the probable future loss. Not only have we to take bad debts into consideration, but if the debts are subject to a discount we must also allow for this. We will assume that if the debtors pay promptly they will be allowed 5 per cent. Therefore, 5 per cent. on the total amount of debts standing in the books at balancing time must be calculated, and...
