I operate on a cash basis, recording income as received regardless of when or how much is billed, sole proprietorship.
I have had some invoices turn into bad debts recently.
It is my understanding that I cannot deduct these loses, since I never recognized the income as an accrual based business would have. However, a friend of mine (also in business on a cash basis, sole prop) says that he deducts his loses due to bad debts.
Who is correct?
Thanks,