Bad debts in Cash Flow Statement?

by Katrien
(Havelock North, New Zealand)

Q: Where is the writing off of bad debts entered on the cash flow statement?


A: It's not in the cash flow statement as it's not a flow of cash. It's just an accounting entry but there is no cash involved in the transaction. So it's in the income statement but not in the cash flow statement.

Comments for Bad debts in Cash Flow Statement?

Click here to add your own comments

Bad debts - indirect method
by: Sofiah


When using the indirect method, you assume that the bad debts written off are being knocked off against the revenue/sales and that's allowed. If you wish to consider as admin expense, then you also need to adjust that in receivables activity.

A basic assumption in taking receivables/payables and inventory activity is assumption of cash in/outflow. For example if your receivables increase, it means that you have made sales (which would have costed you money but you didn't get it back) hence it is deducted and shown as cash outflow.

For the same logic, your bad debts reduced your receivables, which means you received cash, but actually you didn't which requires an adjustment. so a better option is to ignore bad debts.

Click here to add your own comments

Return to Ask a Question About This Lesson!.

Enjoying this Website?
Help Support it with a Donation


Advertise on

privacy policy

Related pages

how to calculate stockholder equitywhat is the meaning of debitedhow do you work out vat on gross amounthow to record prepaid rent journal entryjournal and ledger entries exampleswhat is meant by accounts payablebad debts journal entriesconsumable inventory definitionaccount receivables meaninglifo costing method9 step accounting cycledebits and credits journal entriesdepreciation expense appears on thewhat is meant by debtorsstandard accounting equationwhat is the debit and credit mean in accountingrestaurant p&l templateadvantages and disadvantages of lifo methodhow to calculate markup on selling pricefinancial ledger templatemeaning of the word debitfifo tax accountantsaccounting basics for studentsformula of cogscost formula managerial accountingjournal entries for petty cashdefinition of journal and ledgeraccrual accounting entriesjournal entry for insurance premiumhow to solve markup problemspartnership accounting basicsaccruals in balance sheetsynonym owneraccounting equation questions and answersis trial balance a financial statementretained earnings on cash flow statementprofit percentage calculation formulastock valuation for dummiesexample of accrued revenuewhat is the purpose of the retained earnings statementpercentage markupthe difference between periodic and perpetual inventory systemstrial balances accountingexamples of ledgerspersonal statement of cash flowsbad debts journal entryjournal entry of provision for doubtful debtsdebtors & creditors definitiontrial balance financial statementthree column cash book questions and answersinventory perpetualaccounting merchandising journal entriesdifference between capital and drawingsmeaning of accrual accountingfixed manufacturing cost formulawhat is cash outflowpayment received in advance journal entryallowance for doubtful debts journal entrytrial balance sheet accounts receivablewhat is cash outflowlifo fifo examplepetty cash balance sheet exampledoes unearned revenue go on the income statementfifo and lifo in accountingreserve for bad debts journal entrymanagerial accounting reports exampleshow to work out markuphow to calculate markupsaccounting worksheets for highschool studentsexamples of perpetual inventory systemdeferred income double entryhow to do a multi step income statementrules of double entry system of accountingfinancial accounting journal entries examples