If Bad Debts Are NOT Significant Which Method Is Best

question 8

Multiple Choice

If bad debts are NOT significant which method is best to use?

• A) direct write off method
• B) percentage of credit sales method
• C) allowance method
• D) aging of accounts receivable method

---

Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, entitling the holder to a share of the company's profits through dividends and/or capital appreciation.

Net Profit Margin

A profitability ratio calculated by dividing net income by revenue, indicating the percentage of each dollar of revenue that results in net profit.

Total Assets

The sum of all current and long-term assets held by a company, indicating the total resources that a company has at its disposal.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the owners' claim on the business.