Bad debt losses on accounts receivable:

Question

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Bad debt losses on accounts receivable are considered a normal business expense under the matching principle. This means that the expense should be recognized in the same period as the revenue that generated the account receivable. The allowance method and specific write off method are two different methods used to estimate bad debt losses, but the choice of method does not change the fact that these losses are considered a normal business expense. Cash and trade discounts forfeited are not included in bad debt losses, as they are separate items that have different accounting treatments. The bad debt losses cannot be reported as extraordinary items, as they do not meet the definition of an extraordinary item.

Bad Debt Losses on Accounts Receivable