When a Company That Uses the Allowance Method Writes Off

question 63

Multiple Choice

When a company that uses the allowance method writes off an actual bad debt:

• A)total assets decrease.
• B)total liabilities increase.
• C)total expenses increase and total revenues increase.
• D)total assets,revenue,and expenses remain the same.

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Definitions:

Prompt Payment

The act of settling a transaction or invoice on or before the due date.

Financing Cost

The interest and other costs incurred by a company to borrow funds or access other forms of financing.

Bad Debt

Money owed to a company that is not expected to be paid by the debtor, often leading to a write-off.

Credit Policy

A Credit Policy is a set of guidelines that govern the extension of credit to customers, outlining the criteria for extending credit and the terms of repayment.