If a Company Uses the Direct Write-Off Method of Accounting

question 168

Multiple Choice

If a company uses the direct write-off method of accounting for bad debts,

• A) It is applying the matching principle.
• B) It will record bad debt expense only when an account is determined to be uncollectible.
• C) It will reduce the accounts receivable account at the end of the accounting period for estimated uncollectible accounts.
• D) It will report accounts receivable in the balance sheet at their net realizable value.

---

Definitions:

Fixed Overheads

Costs that do not vary with the level of production or sales activity, such as rent, salaries, and insurance.

Variable Cost Per Unit

The amount of variable expenses incurred to produce one unit of a product or service.

Budgeted Hours

The number of hours allocated or planned for a particular task, project, or period, usually part of a financial or operational plan.

Standard Hours

The predetermined amount of time expected to complete a task or produce a unit of output under normal conditions.