The Use of Estimates on a Tax Return Should Be

question 22

Multiple Choice

The use of estimates on a tax return should be prominently disclosed on the face of the tax return if:

• A) The estimates involved deductions for meals and entertainment
• B) The estimates involved business-related automobile usage
• C) The taxpayer was unavailable to participate in the tax return preparation process due to illness or death
• D) The estimates result in a change in a taxpayer's tax liability by "a sum equal to or greater than $1,000"

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Definitions:

Balance Sheet Approach

A method of accounting that focuses on reporting asset, liability, and equity balances.

Bad Debts Expense

Bad debts expense represents the loss that a company anticipates or realizes due to the inability to collect payments from customers or clients who have failed to fulfill their financial obligations.

Allowance for Doubtful Accounts

An accounting provision that represents the estimated amount of receivables that may not be collected, reducing the net value of accounts receivable.

Uncollectible Accounts

Debts from customers that are considered to be uncollectible and are therefore written off as an expense.