The Use of the Allowance Method Is Required Under the Matching

question 24

True/False

The use of the Allowance method is required under the matching principle.

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Definitions:

Cost Method

Accounting for investments where the investor does not exercise significant influence, recording the investment at initial cost and recognizing income only when dividends are received.

Unrealized Intercompany Gain

Profits recorded on the books resulting from transactions among subsidiaries that are not realized until sold to an external party.

Income Tax Expense

The total amount of income tax a company or individual owes to the tax authorities for the current fiscal year.

Cost Method

An accounting approach used for investments where the investor has little to no influence over the investee, with the investment recorded at its acquisition cost.