Globo Gym Services management have been actively pursuing clients who fail to pay invoices when...
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Accounting
Globo Gym Services management have been actively pursuing clients who fail to pay invoices when they fall due. Based on the experience of Globo Gym Services in the 2021 financial year which ends on December 31, 20% of clients (based on sales revenue) have not and cannot pay their invoices when they fall due. These clients typically close their gyms and can never pay amounts due to Globo Gym Services. Answer the following:
(a) Identify the method and approach that is appropriate to account for bad debts in this case. (2 marks) (b) With reference to three relevant accounting principles, assumptions and/or qualitative characteristics, justify why the method and approach you have identified in part (a) is appropriate. (6 marks)
Clearly label each part of your answer related to parts a and b above. In particular for part b, structure your answer as follows for each of the three relevant accounting principles, assumptions and/or qualitative characteristics: Identify accounting principle, assumption or qualitative characteristic......... Justify method and approach appropriateness in the context of accounting principle, assumption or qualitative characteristic above........
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