The Periodicity Assumption Is the Basis for Which of the Following

question 27

Multiple Choice

The periodicity assumption is the basis for which of the following?

• A) keeping the company's transactions separate from the owners' transactions.
• B) the cut-off of expense recognition only.
• C) the cut-off of revenue recognition only.
• D) dividing the activities of a business into a series of time periods for accounting and reporting purposes.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that estimates the portion of accounts receivable which may not be collected, reducing the reported amount of receivables.

Bad Debt Expense

The cost a company incurs because of the inability to collect payments from customers for credit sales, recognized as an expense.

Uncollectible Accounts

Accounts from which businesses are unable to obtain payment, often leading to writing off these amounts as a bad debt expense.

Allowance Method

A method used in accounting to estimate the amount of uncollectible accounts receivable. This ensures revenues and expenses are matched in the period they are incurred.