In the Allowance Method,the Adjustment Used to Write Off an Uncollectible

question 169

Multiple Choice

In the allowance method,the adjustment used to write off an uncollectible account ________.

• A)decreases net income
• B)has no effect on net income
• C)reduces total assets
• D)decreases liabilities

---

Definitions:

Accounting Profits

The financial gain calculated by subtracting total explicit costs from total revenues, using generally accepted accounting principles.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues; also known as supernormal profits.

Implicit Costs

Costs that represent the opportunity costs of using resources owned by the firm for its own production rather than selling those resources.

Economic Profit

The difference between total revenue and the total cost of inputs (including opportunity costs), reflecting the additional gain from business operations beyond breaking even.