A Bad Debts Recovery Has What Effect on the Balance

question 22

Multiple Choice

A bad debts recovery has what effect on the balance sheet under the allowance method for bad debts?

• A)It has no effect on total assets or stockholders' equity.
• B)It decreases assets and decreases stockholders' equity.
• C)It increases assets and decreases stockholders' equity.
• D)It decreases assets and has no effect on stockholders' equity.
• E)It has no effect on assets and decreases owner's equity.

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Definitions:

Money Orders

Financial instruments issued for a specific amount of money, acting as a safe alternative to cash or personal checks.

Cash

Money in the form of currency that can include coins, currency notes, and sight deposits at financial institutions.

Sarbanes-Oxley

A U.S. law passed in 2002 to protect investors from fraudulent financial reporting by corporations.

Internal Controls

Procedures and mechanisms implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.