The Balance in the Allowance for Doubtful Debts Account Represents

question 61

Multiple Choice

The balance in the allowance for doubtful debts account represents:

• A) bad debts written off in the current accounting period
• B) liquid funds available to meet losses arising from customers becoming insolvent
• C) an amount that is deducted from the Accounts receivable account to reduce it to the estimated realisable value
• D) bad debts written off as accounts receivable considered uncollectable.

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Definitions:

Compound-Interest

A method of calculating interest where the amount is based on the initial principal and the interest that has been accumulated in past periods.

Compounded Quarterly

Involves calculating interest on an investment by adding the accrued interest back into the principal at the end of each quarter, effectively earning interest on interest.

GIC

Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period, typically without the risk of losing the principal invested.

Investor

An individual or entity that allocates capital with the expectation of receiving financial returns.