This targeted approach can provide greater accuracy for businesses with clearly defined customer segments that have different payment behaviors. Watch for dramatic changes in a company’s allowance for doubtful accounts in economic downturns. Think contra asset account of it as a pre-emptive “not getting paid” fund, so your books...

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Any profits made by a business are added to the retained earnings balance and losses subtracted from it. These profits or losses are available in the Statement of Profit or Loss of the business. The profit or loss relates to the accounting period for which the statement is prepared....

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