What Is the Effect of a Bad Debt on the Statement

question 1

Multiple Choice

What is the effect of a bad debt on the statement of financial position, the income statement and the cash flow statement?

• A) Reduce the receivables in the statement of financial position, no effect on the income statement, no effect on the cash flow statement
• B) Reduce the receivables in the statement of financial position, show as expense in the income statement, no effect on the cash flow statement
• C) No effect on the statement of financial position, show as expense in the income statement, no effect on the cash flow statement
• D) No effect on the statement of financial position, show as expense in the income statement, reduce the cash inflows in the cash flow statement

---

Definitions:

Uncertain Duration

Describes a time period whose end point is not predetermined or known, often applying to contracts or agreements.

Ownership Interests

The legal rights and claims an individual or entity has over a property or business.

Partition

The division of real property among co-owners so that each owns a specific portion of the property, or the sale of such property and division of proceeds among co-owners.

Voluntary Act

An action undertaken by an individual with full awareness and of free will, without coercion.