The Adjustment for Bad Debts Using the Percentage of Receivables

question 8

Multiple Choice

The adjustment for bad debts using the percentage of receivables ignored the credit balance in the Allowance account.This error would cause:

• A)total assets to be overstated.
• B)total liabilities to be understated.
• C)net income to be understated.
• D)None of these is correct.

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Definitions:

Productivity

The metric for assessing how effectively a person, machine, or system transforms inputs into valuable outputs.

Competitive Advantage

A situation or factor that gives a business a competitive edge or advantageous standing in its industry.

Lost Productivity

The reduction in work output or efficiency, often due to various hindrances or inefficiencies.

Organizational Competitiveness

The ability of an organization to develop and maintain an edge over its competitors through strategies that attract and retain customers, improve quality, and enhance innovation.