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The biggest challenge that a business faces when estimating the allowance for previously recorded sales is that at the time of the sale, it is not known which particular customer will be a "bad" customer.
What do you mean by Bad debt?
Uncollectible bills expense that are called as Bad debts is a monetary amount owed to a creditor this is not likely to be paid and for which the creditor isn't always inclined to take action to gather for numerous reasons, often due to the debtor now no longer having the cash to pay.
For example because of an enterprise going into liquidation or insolvency.
The complete information about the question is given below:
The challenge businesses face when estimating the allowance for previously recorded sales is that:
A. at the time of the sale, it is not known which particular customer will be a "bad" customer.
B. past default rates are not a good predictor of future default rates
C. In bad economic times, fewer customers will have problems with their payments
D. those sales have been closed into retained earnings
Thus, The biggest challenge that a business faces when estimating the allowance for previously recorded sales is that at the time of the sale, it is not known which particular customer will be a "bad" customer.
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