Which of the Following Transactions Affects Only Statement of Financial

question 147

Multiple Choice

Which of the following transactions affects only statement of financial position accounts?

• A) Recovery of a bad debt using the allowance method.
• B) Recording bad debt expense using the allowance method.
• C) Writing off a bad debt using the direct write-off method.
• D) Recording bad debt expense using the percentage of sales basis.

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Definitions:

Shortage

A situation where the demand for a product or service exceeds the supply available at a specified price.

Usury Law

Legislation that sets maximum interest rates that can be charged on loans, to prevent excessive interest.

Market Equilibrium

A market state where the quantity supplied equals the quantity demanded, leading to a balance in price and volume.

Interest Rate

The cost of borrowing money expressed as a percentage of the total amount borrowed.