Ella is a cash method sole proprietor providing senior care services to clients.One of her clients passes away owing her $1,500 for services performed.Ella has been notified that there are no assets in the estate to pay her bill.Ella will be able to recognize a business bad debt.

Question

Quizplus · Accepted Answer

Under the cash method of accounting, income is only recognized when it is actually received. Since Ella never received the $1,500, it was never included in her income, and therefore, she cannot claim it as a business bad debt.

Ella Is a Cash Method Sole Proprietor Providing Senior Care