Seaver Books, a small book publishing company, wrote off the debt of The Learning Center, and the Academy of Basic Education, both small private schools, after it determined that the schools were facing serious financial difficulty. No notice of the action was sent to the schools; Seaver Books simply stopped sending bills. Nearly a year later, The Learning Center was given a large endowment and a government grant. The resulting publicity brought the school to the attention of Seaver Books, which immediately reinstated the account, and sent a new bill to the school, including interest for the entire time the debt was outstanding. No further action was taken regarding the Academy of Basic Education, which was still operational. Did Seaver Books act ethically in reinstating the debt of one client, and not the other? Explain.

Writing off a doubtful debt or account is a determination that is done on a case-by-case basis. When a customer's ability to repay a debt is in doubt, the reasonable act will be to write off the debt from the balance to ensure prudent accounting. When the customer's ability to settle the debt is reassessed to be favorable, the debt can be reinstated accordingly. However, it is better to restate the debt after the customer has settled the account and not before. The good news is that customers are not usually informed that their accounts have been written off as doubtful and need not be informed of the reinstatement.