Uncollectible accounts (bad debts) are generally an expected and unavoidable cost of doing business. 1 answer below »
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Uncollectible accounts (bad debts) are generally an expected and unavoidable cost of doing business. Some are caused by fraud, others by bankruptcy, still others by death of the debtor. Management must choose between liberal credit policies, which increase both sales and bad debt expenses, and strict credit policies, which reduce sales and minimize bad debts. Picture yourself in charge of a company’s credit policies. How liberal would you be? What precautions would you take to protect against excessive loss?