Which of the Following Items Is Not a Required Condition

question 5

Multiple Choice

Which of the following items is not a required condition for applying hedge accounting?

• A) The hedge is expected to be highly effective.
• B) The forecast transaction does not affect profit or loss.
• C) The effectiveness of the hedge can be reliably measured.
• D) The hedge is assessed on an ongoing basis.

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Definitions:

Allowance Method

An accounting technique used to estimate and account for bad debts by establishing an allowance for doubtful accounts.

Bad Debts Expense

An expense reported on the income statement, accounting for the estimated amount of accounts receivable that are not expected to be collected.

Allowance Method

The allowance method is an accounting technique used to estimate and prepare for the amount of accounts receivable that may not be collectible.

Journal Entries

Records of financial transactions in the accounting system, detailing debits and credits to various accounts.