The Positive (As Opposed to the Negative) Form of Receivables

question 109

Multiple Choice

The positive (as opposed to the negative) form of receivables confirmation may be preferred when

• A) internal control surrounding accounts receivable is considered to be effective.
• B) there is reason to believe that a substantial number of accounts may be in dispute.
• C) a large number of small balances are involved.
• D) the auditor believes that the recipients of the confirmations will give the requests adequate consideration.

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Definitions:

Fixed Asset

A durable, physical asset that a company possesses and employs in its business activities to produce revenue.

Salvage Value

Salvage value is the estimated residual value of an asset at the end of its useful life, indicating how much the asset can be sold for after it is no longer useful for its intended purpose.

Estimated Life

The expected period over which an asset will be useful in the operations of a business.

Units-Of-Output Method

A depreciation technique that allocates the cost of an asset based on its usage, work output, or units produced.