Bad debts

When offering credit terms to customers, there is always a risk that the customer does not pay their debt. In the finance world, this is known as "bad debts".

As we have already recorded sales, we need to record the loss of sales now, as we never received the payment.

This affects both the income statement and the balance sheet. In the income statement, we record a negative value in the sales for the month we write off the debt. In the balance sheet, we need to reduce our debtor’s asset.

The following variables have been defined for January: debtors_jan = 1500

In February, we received news that a customer has gone into liquidation. This customer currently owes 500 USD.

We expect to recover 70% of this amount; the rest has to be written off as bad debts.

Calculate the bad debts amount for February.
Reduce the debtors' value by the amount in bad debts_feb.
Print the bad debts for February.
Print the new debtors' value debtors_feb.

Take Hint (-30 XP)

Exercise

Bad debts

Instructions