The Direct Write-Off Method for Uncollectible Accounts

question 151

Multiple Choice

The direct write-off method for uncollectible accounts:

• A)violates the expense recognition principle.
• B)is an acceptable alternative method of recognizing Bad Debt Expense under GAAP.
• C)results in higher Bad Debt Expense for most companies.
• D)may only be used by companies that do not extend credit to their customers.

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Definitions:

Interest Income

Earnings received from deposit accounts or investments such as bonds, loans where one lends money to someone else in exchange for a return of interest.

Currency Notes

Paper money issued by a country's central bank or government as legal tender for transactions.

Money Demand Curve

A graph showing the relationship between the quantity of money demanded and the interest rate.

Nominal Interest Rate

The interest rate before adjustments for inflation, representing the face value of money borrowed or saved.