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Management Can Choose Between Two Bases in Calculating the Estimated

question 24

Essay

Management can choose between two bases in calculating the estimated uncollectible accounts under the allowance method. One basis emphasizes an income statement viewpoint whereas the other emphasizes a statement of financial position viewpoint. Identify the two bases and contrast the two approaches. How do the different points of view affect the amount recognized as Bad Debts Expense during the accounting period?


Definitions:

Payment

The transfer of money or goods in exchange for a product or service.

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