Problem
Your sister has just opened a boutique specializing in shoes and accessories called "To Papoutsi," which is Greek for "the shoe." The upscale shop will provide store credit for customers so that customers can pay later for their shoes.
The CPA who helped in setting up the books for the boutique included an account titled Allowance for Doubtful Accounts.
Your sister does not want to use the allowance account, electing to write off bad debts as they are deemed un-collectible.
A discussion posting to address:
1) The importance of estimating bad debts and using the allowance account.
2) The differences between using the Direct Write-Off and Allowance Methods.
3) Why the allowance method is required for financial statement reporting.
4) How the credit department and collections department impact bad debts.