A Method of Reducing Overdue Accounts and Limiting Bad Debts

question 39

Multiple Choice

A method of reducing overdue accounts and limiting bad debts is setting limits to the credit allowed on______.

• A) corporate buyers
• B) individual accounts
• C) high-cost goods
• D) low-cost goods
• E) none of the above

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Definitions:

Expense with Revenues

Represents the relationship between the costs incurred and the revenues generated in a specific period.

Direct Write-off Method

An accounting method for treating bad debts that writes off specific invoices as uncollectable only at the time they are deemed irrecoverable.

Allowance Method

An accounting technique used to estimate and account for doubtful accounts, providing a more accurate reflection of realizable revenue.

Cash Realizable Value

The amount of money that can be expected to be received from receivables or other assets, after accounting for any discounts or allowances.