Which term refers to accounts receivable that are not collectible?

• A. Bad Debts
• B. Cost
• C. Supplies
• D. Transaction

Answer: (A)

Uncollectible accounts receivable are called bad debts. When you extend credit and some customers don’t pay, those amounts are written off or reserved for with an allowance for doubtful accounts, reflecting that not all sales on credit will be collected. This term specifically labels those receivables that cannot be collected, unlike costs, which measure resources spent; supplies, which are items used in operations; or a transaction, which is any business event. In financial statements, bad debts reduce accounts receivable and are recognized as an expense (or used to adjust the allowance), showing the expected loss from credit sales.