Which of the following is NOT included in allowable payments under the cash basis?

Under the cash basis of accounting, income is recognized when it is received, and expenses are recognized when they are paid. Allowable payments typically include actual cash expenses related directly to business operations such as payments for business expenses, interest payments on loans, and payments for plant and machinery.

Bad debts, however, are not included in allowable payments under the cash basis. This is because bad debts refer to amounts that are expected to be uncollectible, and under the cash basis, only actual cash transactions impact the financial statements. Since bad debts represent money that has not been received, they do not qualify as an allowable payment. Thus, they do not get recorded as an expense until they are actually written off, if applicable. This distinction is crucial for understanding which expenses impact the cash basis reporting and financial position of the business.