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Collectively, the employees of a construction company work hard to perform work and provide services for which payment is deserved. Invoiced amounts are recorded as accounts receivables (A/Rs), recognized as income, and should be converted into cash. But the A/Rs are not always received.
If and when amounts owed to a company are not paid, then the unpaid amounts can (at least) be deductible as bad debts for tax purposes.
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