An Expense Incurred as a Result of Sales on Credit

question 69

Multiple Choice

An expense incurred as a result of sales on credit or on account is:

• A) Bad Debts Expense
• B) Prepaid Rent
• C) Insurance Expense
• D) Allowance for Doubtful Accounts

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account on the balance sheet, estimating the amount of receivables that are expected to be uncollectible.

Uncollectible Accounts Receivable

Debts owed to a company that are considered unlikely to be recovered, often due to the debtor's inability to pay.

Debit Balance

An accounting entry that represents a situation where debits are greater than credits in an account, often indicating assets or expenses.

Allowance for Doubtful Accounts

A contra-asset account that reduces the total receivables balance to reflect accounts that may not be collectible.