The Assumption That People Do Not Intentionally Make Decisions That

question 135

Multiple Choice

The assumption that people do not intentionally make decisions that would leave them worse off is known as

• A)the rationality assumption.
• B)the microeconomic assumption.
• C)the ceteris paribus assumption.
• D)the normative assumption.

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Definitions:

Allowance Method

An accounting technique that anticipates and adjusts for potential future bad debts or credit losses.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.

Allowance for Doubtful Accounts

A contra-asset account that estimates the portion of accounts receivable which may not be collected, reducing the reported amount of receivables.

Bad Debt Expense

The cost a company incurs because of the inability to collect payments from customers for credit sales, recognized as an expense.