Financial Statements - II — Important Questions

Debts that cannot be recovered

Bad debts are amounts owed by debtors that the business determines cannot be collected.

Income earned but not yet received

Accrued income represents earnings that have been generated but not yet received in cash.

Income received for future periods

Income received in advance is payment received before the related services or goods are delivered.

An estimated amount for potential uncollectible debts

Provision for doubtful debts is an estimated reserve to cover potential losses from debts that might not be collected.