An Accounting Procedure That (1) Estimates and Reports Bad Debts

question 133

Multiple Choice

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

• A)Allowance method of accounting for bad debts.
• B)Aging of notes receivable.
• C)Adjustment method for uncollectible debts.
• D)Direct write-off method of accounting for bad debts.
• E)Cash basis method of accounting for bad debts.

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Definitions:

Accounting Profit

The difference between total monetary revenue and total monetary costs, excluding the consideration of opportunity costs.

Explicit Costs

These are the direct, clear expenses related to business operations, such as salaries, utilities, and rent, that are easily quantifiable.

Accounting Profit

The difference between the total revenue and explicit costs of a firm, not accounting for implicit costs.

Economic Profit

The variance between a company's overall incomes and its combined explicit and implicit expenses.