The Net Method of Recording Accounts Receivable Is Rarely Used

question 20

Multiple Choice

The net method of recording accounts receivable is rarely used because it

• A)is less theoretically correct than the gross method.
• B)requires an "Allowance for Sales Discounts" to be reported on the statement of financial position.
• C)has a different effect on the statement of financial position and income statement.
• D)requires more bookkeeping for the additional adjusting entries after the discount period has passed.

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Definitions:

Adjusted Gross Income

An individual's total gross income minus specific deductions, used as the basis for calculating taxable income on federal tax returns.

Casualty Loss Deduction

A tax deduction for property losses as a result of a sudden, unexpected, or unusual event.

Federal Disaster Area

An area officially declared by the government to be in a state of emergency due to a disaster, affording affected individuals potential tax relief and other benefits.

Insurance Settlement

A financial payment made by an insurance company to a policyholder or claimant as a resolution for a filed claim against a policy.