The Account Allowance for Doubtful Accounts Is Necessary Because

question 39

Multiple Choice

The account Allowance for Doubtful Accounts is necessary because

• A) when recording bad debts expense, it is not possible to know which specific accounts will not be paid.
• B) uncollectible accounts that are written off must be accumulated in a separate account.
• C) a liability results when a credit sale is made.
• D) management needs to accumulate all the credit losses over the years.

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Definitions:

Accrued Interest

Accrued Interest is the interest that has been incurred but not yet paid or received as of a specific date.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and subsequently adjusted for the investor's share of the investee's profits or losses.

Voting Stock

Shares of a company that grant the shareholder the right to vote on corporate matters and elect the board of directors.

Net Loss

Net loss occurs when a company's expenses exceed its revenues during a specific accounting period, resulting in a negative profit.