To Compute the Percentage Change in a Horizontal Analysis from Last

question 24

Multiple Choice

To compute the percentage change in a horizontal analysis from last year to this year, the computation will be:

• A) (Current Year - Last Year)/ Last Year.
• B) (Last Year- Current Year)/ Last Year.
• C) (Last Year- Current Year)/ Current Year.
• D) (Current Year- Last Year)/ Current Year.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that may not be collectible.

Bad Debts Expense

A non-cash expense that represents accounts receivable that a company no longer expects to collect, indicating customers are unlikely to pay their outstanding debts.

Allowance Method

An accounting technique used to estimate and account for potential uncollectible accounts receivable as an expense against current period income.

Bad Debts Expense

An expense recognized when it is judged that some accounts receivable cannot be collected, reflecting the cost of credit sales that will not turn into cash.