Question Tag: Debtor Management

Which of the following statements correctly differentiates bad debt from doubtful debt?

A. Bad debt arises when a customer is in difficulty but might be able to recover from it, while doubtful debt is an amount owed by a customer that the business believes it will never be able to collect.

B. Bad debt is an amount owed by a customer that the business believes it will never be able to collect, while doubtful debt is an amount owed by a customer that the business hopes to collect despite the customer’s difficulties.

C. Bad debt is an amount owed by a customer that the business believes it might be able to collect despite difficulties, while doubtful debt arises when a customer is dishonest and has no intention to pay.

D. Bad debt occurs when a customer disputes whether a contract has been fulfilled or not, while doubtful debt arises when a customer is declared bankrupt or insolvent.

E. Bad debt refers to the dishonesty of a customer, while doubtful debt is an amount owed by a customer that the business believes it might not be able to collect, but still hopes to do so.