GAAP Prefers Companies to Use The

question 51

Multiple Choice

GAAP prefers companies to use the:

• A) direct write-off method to evaluate bad debts.
• B) allowance method to evaluate bad debts.
• C) amortization method to evaluate bad debts.
• D) 360-day method to evaluate bad debts.

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Definitions:

Working Papers

Documents that evidence preliminary findings or drafts used in preparing a final document, often in accounting or research.

Accountant-Client Privilege

A legal principle allowing confidentiality of communication between accountants and their clients, similar to attorney-client privilege.

Notes

Legal documents that serve as evidence of a debt, with the issuer promising to pay the holder a specific sum of money at a future date or upon demand.

Restatement Test

A legal principle used in contracts to determine the intent of the parties to enter into a contractual agreement.