When an Account Is Written Off Under the Allowance Method

question 99

Multiple Choice

When an account is written off under the allowance method:

• A)accounts receivable decreases.
• B)bad debt expense is increased.
• C)accounts receivable remains unchanged.
• D)accounts receivable increases.

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Definitions:

Net Operating Income

Income generated from regular business operations, excluding deductions for interest and taxes.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including costs related to factory equipment maintenance, factory management salaries, and utilities.

Period Cost

Expenses that are not directly tied to the production process and are charged to the period in which they occur, such as selling and administrative expenses.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and are significant in cost.