How to Answer: If there is $20,000 of aged accounts receivable that will be fully written off, what impact will this have on each of the financial statements?
Advice and answer examples written specifically for a Finance job interview.
16. If there is $20,000 of aged accounts receivable that will be fully written off, what impact will this have on each of the financial statements?
How to Answer
This answer is very straight forward, so do not get hung up on it: The direct write-off method allows a business to record Bad Debt Expense only when a specific account has been deemed uncollectible. The account is removed from the Accounts Receivable balance and Bad Debt Expense is increased. Accounts Receivable on the balance sheet will be debited by $20k and Bad Expense on the income statement gets debited $20k.
Written by Bobbi Witt
Entry Level
"Accounts Receivable on the balance sheet will be debited by $20k and Bad Expense on the income statement gets debited $20k."
Written by Bobbi Witt on June 18th, 2018
Experience
"The direct write-off method allows a business to record Bad Debt Expense only when a specific account has been deemed uncollectible. The account is removed from the Accounts Receivable balance and Bad Debt Expense is increased. Accounts Receivable on the balance sheet will be debited by $20k and Bad Expense on the income statement gets debited $20k."
Written by Bobbi Witt on June 18th, 2018