A Payee of a Note Will Always Honor a Note

question 171

True/False

A payee of a note will always honor a note and pay it in full.

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Definitions:

Bad Debt Expense

An expense reported on the income statement, representing the estimate of receivables that a company does not expect to collect.

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated portion of accounts receivable that may not be collectible.

Uncollectible Receivables

Refers to money owed to a company by its debtors that is unlikely to be paid and is considered a loss.

Allowance Method

A technique in accounting used to estimate and anticipate bad debts (uncollectible accounts receivable) and adjust the books accordingly.