If a Company Changes the Method It Uses to Compute

question 47

Multiple Choice

If a company changes the method it uses to compute the allowance for uncollectible accounts receivable because more recent information has become available,how is this change in method is accounted for?

• A) The change is only reported in the current period in which the change is made
• B) The change is reported in all future periods affected by the change
• C) Previously issued financial statements are not adjusted by the change
• D) All of the above are correct ways to account for the change

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Definitions:

Purchases Account

An account used in accounting to track all purchases of goods and materials that a business intends to resell.

Cost Of Goods Purchased

The total expense incurred by a company to buy the goods it has purchased for resale, including shipping and handling fees.

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold, highlighting the efficiency of a company in managing its operations and costs.

Operating Expenses

Costs incurred during the normal operations of a business, excluding the cost of goods sold.