What term describes money a customer owes that a business determines will not be paid back?

What term describes money a customer owes that a business determines will not be paid back?

• A. Accounts receivable
• B. Accounts payable
• C. Doubtful accounts
• D. Accounts uncollectible

Answer: (D)

When a business decides that a customer’s owed money won’t be paid, that specific amount is called uncollectible accounts (also known as bad debts). This is the actual debt the company expects to write off. Accounts receivable is the total amount customers owe, an asset that may or may not be collected. Accounts payable is what the business itself owes to others. Doubtful accounts refers to the estimated portion of receivables that might not be collected in the future, used to set up an allowance for doubtful accounts, not to the actual uncollectible balance.

When a business decides that a customer’s owed money won’t be paid, that specific amount is called uncollectible accounts (also known as bad debts). This is the actual debt the company expects to write off.

Accounts receivable is the total amount customers owe, an asset that may or may not be collected. Accounts payable is what the business itself owes to others. Doubtful accounts refers to the estimated portion of receivables that might not be collected in the future, used to set up an allowance for doubtful accounts, not to the actual uncollectible balance.