Performance Bonuses

question 26

Multiple Choice

Performance bonuses:

• A) Are capitalised as part of the cost of an asset 'Bonus Payments'.
• B) Form part of salaries and wages and are treated in the same manner.
• C) Are charged directly against 'Opening Retained Earnings'.
• D) Form part of the leave entitlements of employees.
• E) Are not covered by AASB 119.

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Definitions:

Allowance for Doubtful Accounts

The allowance for doubtful accounts is an accounting technique to estimate the amount of receivables that are expected not to be collected, acting as a contra account to accounts receivable.

Bad Debt Expense

An expense reported on the income statement, representing the estimated amount of credit sales that are not expected to be collected due to customer default.

Uncollectible Receivables

Refers to money owed to a company that it is unable to collect from its debtors, often considered as a bad debt expense.

Allowance Method

An accounting technique used to estimate and account for bad debts, where companies anticipate some accounts receivable will be uncollectible.