The Direct Write-Off Method of Accounting for Bad Debts

question 5

Multiple Choice

The direct write-off method of accounting for bad debts

• A)uses an allowance account.
• B)uses a contra-asset account.
• C)does not require estimates of bad debt losses.
• D)is the preferred method under generally accepted accounting principles.

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Definitions:

Indorsements

Signatures or statements on a negotiable instrument (like a cheque or bill of lading) that specify the terms under which the document is to be transferred or can enforce rights under it.

Negotiation

The process where two or more parties discuss and modify terms of an agreement to reach a mutually acceptable solution.

Indorsements

The act of signing a document, typically on the back of a negotiable instrument like a check, signifying agreement, approval, or endorsement of its contents.

Indorsee

The person to whom the rights under a negotiable instrument are transferred by way of endorsement.