How does bad debt expense flow through 3 financial statements?
How does bad debt expense flow through 3 financial statements?
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Bad Debt cause double entry as follow: Bad Debt Expense : Debit - IS - Increase Expense Decrease in Debt : Credit - BS - Decrease BS
As for Cash Flow you have to minus of the Bad Debt as well! Conclusion: IS - Decrease BS - Shrink Cash Flow - Increases
why do you have to subtract bad debt in cash flow statement? cuz it's a non-cash expense?
Yes, similar to how you add depreciation back to cash flows because it's a non-cash expense.
My bad , th cash flow would have no effect due to the following: Receivable will minus off the bad debt expense But as bad debt expense was a non cash expense it will be add back
My bad it was minus off from the Cash Flow, as it was non-cash expense
Hey guys, quick question about the CFS for this problem. Wouldn't the positive cash flow from adding back the Bad Debt Expense (since it is non-cash) be double counted for in "Change of Net Working Capital" since A/R goes down by? Would appreciate clarification, thanks!
Sorry for the confusion, the net effect for cash flow is zero as the explanation was given above
Income statement: operating income down by $100 (assume BDE of $100, TR of 40%) to write down the bad debt expense, net income down by $60 Cash flow statement: net income down by $60, add back $100 to cf from operating activities for non cash Balance Sheet: cash up 40, a/r down $100 so assets down -60, right side shareholders equity -60 from net income in retained earnings
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