A Company That Uses the Direct Write-Off Method of Accounting

question 7

True/False

A company that uses the direct write-off method of accounting for uncollectible accounts must still prepare a year-end adjusting entry to estimate its uncollectibles.

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Definitions:

Incoming Merchandise

Refers to items or goods received by a business for sale or use in production.

Estimated Inventory Returns

A financial estimate of the goods a company expects to return to suppliers from the inventory it purchased.

Asset Account

An account that records the valuable resources owned by a business, expected to provide future economic benefits.

Goods Returned

Products sent back to the seller by the buyer, usually due to defects, inaccuracies, or dissatisfaction.