Explain the Difference Between Direct and Indirect Expenses in Accounting

question 126

Essay

Explain the difference between direct and indirect expenses in accounting for departments.

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Definitions:

Accounts Receivable

Amounts owed to a company by customers for goods or services provided on credit, which are expected to be collected in cash in the future.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is a contra-asset account that reduces the total receivables reported to reflect the amount expected to be uncollectible.

Bad Debts Expense

The cost associated with accounts receivable that a company is unable to collect, recognized as an expense.

Allowance Method

A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period, allowing businesses to record expected losses.