Lesson Topic: Bad and Doubtful Debts

Objective: At the end of this lesson, students will understand the meaning of bad and doubtful debts, their effects on an organization’s financial position, and the methods used to record and account for these debts.

Materials Required: Student worksheets, white board and markers.

Time: 45 minutes

Lesson Outline:

I. Introduction (5 minutes)

A. Explain that bad and doubtful debts are those where the likelihood of payments by the customer is uncertain or unlikely.

B. Outline the purpose and objectives of the lesson.

II. Bad and Doubtful Debts (15 minutes)

A. Explain that bad debts are those which have been identified as non-collectible, while doubtful debts are those where the recoverability (or collection) of the full amount is uncertain.

B. Walk students through examples of how to identify these debts in a trial balance and how to record them in the accounts receivable account.

III. Effects of Bad and Doubtful Debts on Financial Position (15 minutes)

A. Explain how these types of debts impact the financial position of an organization in terms of decreased liquidity and a higher risk of financial distress.

B. Teach students how to complete the necessary adjusting entries to account for these type of debts in the financial statements.

IV. Summary and Concluding Questions (10 minutes)

A. Summarize the key points of the lesson and provide students with time to ask questions.

B. Provide students with a worksheet to review and assess their understanding of the concepts covered.

C. Ask Review Questions such as:

1. What are bad and doubtful debts?

2. How do they impact an organization’s financial position?

3. How are they recorded and accounted for?