The Main Advantage of Using a Netting System to Settle

question 33

Multiple Choice

The main advantage of using a netting system to settle foreign currency payments is that it:

• A)drastically reduces the number of payments.
• B)increases the number of payments.
• C)reduces the number of foreign currencies.
• D)none of these options.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated portion of accounts receivable that may not be collectible.

Percentage-of-Receivables Basis

A method used to estimate the amount of bad debt expense by applying a fixed percentage to the total amount of accounts receivable.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's receivables that may not be collectible.

Bad Debt Expense

An expense reported on the income statement, representing the amount of non-collectible accounts receivable during a period.