When the Collectability of an Amount That Has Been Recorded

question 41

Multiple Choice

When the collectability of an amount that has been recorded as revenue becomes uncertain,the appropriate accounting treatment is to:

• A) Recognise as an expense the amount in respect of which recovery has ceased to be probable.
• B) Calculate the discounted present value of the amount expected to be received and adjust the recorded revenue accordingly.
• C) Adjust the amount of revenue originally recognised.
• D) Make no adjustment as the amount and timing of the uncollectible amount is uncertain.
• E) None of the given answers.

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Definitions:

Exchange

A marketplace where securities, commodities, derivatives, and other financial instruments are traded between buyers and sellers.

Land

A non-depreciable asset that typically refers to the solid surface of the earth that a business owns and uses for business purposes.

Operating Activities

Activities that relate directly to the operation of a company, including production, sales, and day-to-day business functions.

Accounts Receivable

Money owed to a company by customers for products or services that have been delivered but not yet paid for.