The Most Important and Volatile Component of the Current Account

question 227

Multiple Choice

The most important and volatile component of the current account in the U.S.balance of payments is:

• A) transfer payments abroad,such as foreign aid.
• B) net income on capital held abroad.
• C) net exports.
• D) foreign direct investment.

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Definitions:

Bad Debt Write-offs

The process of removing uncollectable accounts receivable from the accounting records, recognizing them as a loss.

Allowance Method

An accounting technique that estimates and records bad debts expense from credit sales.

Bad Debt Expense

An expense account representing accounts receivable that a company does not expect to collect and writes off as a loss.

Allowance for Doubtful Accounts

A contra account that reduces the total receivables on the balance sheet to reflect the amount that is expected not to be collected.