The Expense Recognition (Matching) Principle, as Applied to Bad Debts

question 49

Multiple Choice

The expense recognition (matching) principle, as applied to bad debts, requires:

• A) The use of the direct write-off method for bad debts.
• B) That bad debts not be written off.
• C) That bad debts be disclosed in the financial statements.
• D) That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions.
• E) The use of the allowance method of accounting for bad debts.

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Definitions:

Marginal Ordinary Income Tax Rate

The tax rate that applies to the last dollar of the taxpayer's income, influencing decisions on additional income.

Tax Rate

The percentage at which an individual or corporation is taxed by the government.

Taxpayer

An individual or entity that is obligated to pay taxes to a federal, state, or local government.

Income

The financial amount earned from work (wages), capital (investments), or other revenue streams during a specific time frame.