An Advantage of Basing Bad Debt Expense on the Historical

question 62

Multiple Choice

An advantage of basing bad debt expense on the historical relationship between bad debts and net credit sales is that

• A) it provides the best estimate of the net realizable value of accounts receivable.
• B) it provides the best information to the credit department to use in its collection activities.
• C) it best adheres to principle of cause and effect recognition.
• D) it considers the balance in the allowance account when making the bad debt expense estimate.

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Definitions:

Goal-setting

The process of identifying specific, measurable, achievable, relevant, and time-bound objectives to guide actions and behaviors.

Organising

The process of arranging resources and tasks to achieve objectives, including structuring teams, assigning tasks, and allocating resources.

Scenario Planning

Identifies alternative future scenarios and makes plans to deal with each. In a fast-changing and unpredictable world, it is often necessary to have multiple scenarios for planning purposes.

Future Scenarios

Hypothetical or predictive models that outline possible events or developments based on current trends or conditions.