Under the Allowance Method, If Uncollectible Account Write-Offs During the Year

question 78

Multiple Choice

Under the allowance method, if uncollectible account write-offs during the year exceed the allowance amount, the balance in allowance for doubtful accounts at year end prior to adjustment:

• A)will be zero.
• B)should be deducted from accounts receivable.
• C)will be a debit.
• D)should be adjusted by debiting it to bring the balance back to zero.

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Definitions:

Collectibility

The likelihood that a receivable will be collected from a debtor, typically considered in revenue recognition and accounting for bad debts.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

Money Market

A section of the financial market where short-term funds are borrowed and lent, involving instruments like treasury bills and commercial paper.

Cash on Hand

The total amount of any accessible cash or near-cash assets, such as money in checking or savings accounts, at any given time.