A Company Has Significant Bad Debts

question 92

Multiple Choice

A company has significant bad debts.Why is the direct write-off method unacceptable?

• A)Direct write-offs would be immaterial.
• B)It is not allowed for tax reasons.
• C)It is not in accordance with the accrual method of accounting.
• D)Assets will be understated on the balance sheet.

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Definitions:

Compounded Monthly

Interest calculation method where interest is added to the principal balance monthly, affecting the total interest accrued over time.

Retirement Income

The amount of money or income a person receives after retiring from work, which can come from various sources such as pensions, investments, and savings.

Compounded Semi-annually

Interest on a loan or investment calculated twice a year, adding the interest to the principal for future calculations.

Withdrawals

The act of taking money out of an account, which can decrease the account balance.