Theoretically, the Amount of Estimated Future Returns and Allowances on Credit

question 10

Multiple Choice

Theoretically, the amount of estimated future returns and allowances on credit sales should be recorded during the period of the sale so as not to overstate sales and ending accounts receivable.In practice, these estimates are rarely recorded because

• A)the amount of such returns and allowances tends to fluctuate too greatly from period to period
• B)there is too much uncertainty surrounding such estimates
• C)such estimates are not allowed according to generally accepted accounting principles
• D)the amount of such returns and allowances is usually not material

---

Definitions:

Cost of Goods Sold

Costs directly tied to the creation of products sold by a business, covering materials, labor, and factory overhead.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing insight into its financial position.

Spreadsheet

A digital worksheet or a software application that allows for the organization, analysis, and storage of data in tabular form.

Job-Order Costing

An accounting method that assigns costs to specific batches or job orders, making it possible to track the financial inputs and outputs of individual jobs.