The Advantage of Relating a Company's Bad Debt Expense to Its

question 34

Multiple Choice

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach

• A) gives a reasonably correct statement of receivables in the statement of financial position.
• B) best relates bad debt expense to the period of sale.
• C) is the only generally accepted method for valuing accounts receivable.
• D) makes estimates of uncollectible accounts unnecessary.

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Definitions:

Equivalent Units

A term used in cost accounting to indicate a standard amount of work done on an incomplete unit, making it comparable to complete units.

Beginning Inventory

The value of goods available for sale at the start of an accounting period.

First-In, First-Out

An inventory valuation method where the goods purchased or produced first are sold or used first.

Equivalent Units

A metric used in cost accounting to express the amount of work done by manufacturers who have partially completed units on hand at the end of an accounting period.