The Allowance for Doubtful Accounts Is Necessary Because

question 35

Multiple Choice

The Allowance for Doubtful Accounts is necessary because

• A)when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
• 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:

Worker's Tools Depreciation

The reduction in value of tools over time due to use and wear, attributed to the worker's tools used during production or service delivery.

Factory Overhead

All the indirect costs associated with manufacturing, excluding direct materials and direct labor costs, such as utilities, maintenance, and equipment depreciation.

Direct Materials

Raw materials that can be directly attributed to the manufacturing of a specific product and are an essential component in its production.

Office Equipment Depreciation

The process of allocating the cost of office equipment over its useful life, recognizing it as an expense on financial statements.