The Collection of an Account That Had Been Previously Written

question 17

Multiple Choice

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles

• A) will increase income in the period it is collected.
• B) will decrease income in the period it is collected.
• C) requires a correcting entry for the period in which the account was written off.
• D) does not affect income in the period it is collected.

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Definitions:

Earnings Per Common Share

A measure of a company's profitability that calculates the net income available to common shareholders per share of common stock outstanding.

Indirect Method

A method of reporting the cash flows from operating activities that begins with net income and adjusts for revenues and expenses that do not involve the receipt or payment of cash.

Operating Activities

Business processes related to the core functions of a company that generate revenue, such as sales and production.

Net Income

The total profit or loss of a company after all revenues, expenses, taxes, and costs have been accounted for, typically reported on the bottom line of the income statement.