Why Are Estimates of Bad Debts Used to Record Uncollectible

question 134

Multiple Choice

Why are estimates of bad debts used to record uncollectible amounts of accounts receivable?

• A)Doing so avoids violating the expense recognition ("matching")principle.
• B)It is an easier method than waiting for accounts to actually become uncollectible.
• C)Because the actual amount of uncollectible accounts can never be known.
• D)It is the most conservative approach.

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Definitions:

Customer Churn

The measure of how many customers stop using or subscribing to a service over a certain time period, often used to gauge a business's performance.

Customer Interactions

Any form of communication or engagement between a company and its customers, encompassing a wide range of activities from sales to customer service.

On-Premise CRM

Customer Relationship Management software that is installed and runs on the premises of the organization using it, rather than being hosted on cloud servers.

Traditional CRM

Traditional Customer Relationship Management (CRM) refers to the practices, strategies, and technologies used by organizations to manage and analyze customer interactions and data throughout the customer lifecycle, aiming to improve business relationships.