A Company Has Significant Uncollectible Receivables

question 88

Multiple Choice

A company has significant uncollectible receivables.Why is the direct write-off method unacceptable?

• A) Assets will be understated on the balance sheet.
• B) It violates the matching principle.
• C) Direct write-offs would be immaterial.
• D) It is not allowed for tax reasons.

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Definitions:

Consumption Expenditures

The total amount spent by households on goods and services for personal use.

Government Expenditures

The total amount spent by the government, including spending on goods, services, and public works, and transfer payments.

GDP Components

The parts that make up Gross Domestic Product, generally categorized as consumption, investment, government spending, and net exports.

GDP

Gross Domestic Product, the total monetary value of all final goods and services produced within a country's borders in a specific time period.