Show The Treatment Of Bad Debts In Financial Accounts?


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Treatments of bad debts in financial accounts:-

A.    Revenues should be reported net of discounts and allowances with the discount amount parenthetically disclosed on the face of the statement or in the notes to the financial statements. Alternatively, revenues may be reported gross with the related discounts and allowances reported directly beneath the revenue amount.

B.    Provision must be made for bad debt estimates each year. Tuition and fees should be reported net of allowances and discounts. As such, increases in allowances for bad debts are recorded as a reduction in revenues rather than an expense.

C.  With regard to the presentation of the provision for bad debt estimates taken as a reduction of tuition and fee revenue, this should be deducted from the gross tuition and fee line item and should not be separately displayed on the face of the statement. This treatment is different than scholarship allowances which are required to be disclosed either on the face or in the notes to the financial statements.
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