Under the Direct Write-Off Method of Accounting for Uncollectible Accounts

question 152

Multiple Choice

Under the direct write-off method of accounting for uncollectible accounts

• A) the allowance account is increased for the actual amount of bad debt at the time of write-off.
• B) a specific account receivable is decreased for the actual amount of bad debt at the time of write-off.
• C) balance sheet relationships are emphasized.
• D) bad debt expense is always recorded in the period in which the revenue was recorded.

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Definitions:

Gross Profit

The difference between revenue and the cost of goods sold before accounting for certain other costs such as salaries, administrative expenses, and taxes.

Credit Terms

The conditions under which credit will be extended to a customer, including the repayment time frame and any applicable interest or discounts for early payment.

Credit Period

The amount of time allowed by a seller for a buyer to pay for a purchase, often used in trade credit agreements.

Source Documents

Original records that contain the details to support business transactions, such as invoices, receipts, and contracts.