A Method of Estimating Bad Debts That Focuses on the Income

question 28

Multiple Choice

A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on:

• A) direct write off.
• B) percentage of credit sales.
• C) the balance in the trade receivable accounts.
• D) aging the trade receivable accounts.

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Definitions:

Moral Principles

Fundamental beliefs regarding right and wrong behavior that guide an individual's actions and decisions.

Multiple Means

Refers to having various methods or ways to achieve a particular end.

Error Management Theory

A theoretical framework suggesting that humans have evolved biases in judgment and decision-making processes to minimize costly errors.

Omission Bias

Omission bias is the tendency to favor an act of omission (not doing something) over one of commission (doing something), often due to the fear of making a wrong choice.