Which of the Following Is True About Bad Debt Expense

question 86

Multiple Choice

Which of the following is true about bad debt expense?

• A) It should appear on the statement of financial position as a contra asset.
• B) It should appear on the income statement as a contra revenue.
• C) It should appear on the income statement as part of selling expenses.
• D) It should not appear in the financial statements.

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Definitions:

Mark-up

The amount added to the cost price of goods to cover overhead and profit, determining the selling price.

Deferred Tax Asset

Financial accounting that recognizes reduced income tax in the future due to deductible temporary differences and carryforwards.

Unrealised Profit

Profit that has been generated but not yet realized through a transaction, such as an increase in value of an investment that has not yet been sold for cash.