Which of the Following Describes the Selling and Administrative Expenses

question 133

Multiple Choice

Which of the following describes the selling and administrative expenses budget?

• A) It aids in planning to ensure the company has adequate inventory on hand.
• B) It captures the variable and fixed components of selling and administrative expenses of the business.
• C) It depicts the breakdown of sales based on terms of collection.
• D) It shows the cash flows related to the selling and administrative expenses and helps in planning to ensure the business has adequate cash.

---

Definitions:

Allowance Method

An accounting approach to managing bad debts by estimating and recording uncollectable accounts receivable as an expense before the debts are known to be uncollectable.

Bad Debts Expense

The cost associated with the portion of accounts receivable that is estimated to be uncollectible during a fiscal period.

Uncollectible Account

A receivable that is considered uncollectible from a debtor, usually displayed as an expense.

Allowance for Doubtful Accounts

A contra-account reducing accounts receivable to reflect the amount expected not to be collected due to customers' defaulting.