Which of the Following Statements Does Not Correctly Describe the Allowance

question 21

Multiple Choice

Which of the following statements does not correctly describe the allowance for doubtful accounts balance?

• A)It is reported on the balance sheet as a component of current assets.
• B)It is a contra-asset account.
• C)It is reported on the balance sheet as a current liability.
• D)It is created as a result of the adjusting entry to record bad debt expense.

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Definitions:

Job-Order Costing System

A cost accounting system that assigns costs to specific batches or job orders, making it easier to track the cost of producing each item or batch.

Overapplied

Occurs when the allocated manufacturing costs exceed the actual manufacturing costs incurred.

Underapplied

Refers to a situation where the allocated or applied costs in an accounting period are less than the actual costs incurred.

Cost of Goods Sold

Represents the total expense incurred from creating or acquiring the goods that a business sells during a period, crucial for evaluating profitability.