For a Company with Significant Uncollectible Receivables,the Direct Write-Off Method

question 110

Multiple Choice

For a company with significant uncollectible receivables,the direct write-off method is unsuitable because ________.

• A)it overstates liabilities on the balance sheet
• B)it violates the matching principle
• C)it uses estimates for determining the bad debt expenses.
• D)it is not allowed for tax reasons

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Definitions:

Internal Control System

Procedures and policies set by an enterprise to preserve the correctness of its financial and bookkeeping details, advance accountability, and obstruct malicious acts.

Financial Records

Documented information of a business's operations, including income, expenses, assets, and liabilities, used to track financial performance.

Bank Statement

A document or report issued by a bank summarizing transactions in an account holder's account over a specific period.

Deposits

Funds placed into a bank account or towards the purchase of an asset, representing a liability for the bank or a commitment by the buyer.