C operates a glass business as a sole proprietorship.The business uses the cash method of accounting.C replaced all of the windows for J Corporation when they were broken by high winds.J Corporation went out of business before C could collect the $3,000 due for the work he performed.C may deduct $3,000 as a bad debt.

Question

Quizplus · Accepted Answer

Since C operates using the cash method of accounting, he only recognizes income when it is actually received. Therefore, he cannot claim a bad debt deduction for money that was never included in his income.

C Operates a Glass Business as a Sole Proprietorship