Which of the Following Is TRUE of the Balance Sheet

question 114

Multiple Choice

Which of the following is TRUE of the balance sheet presentation of the Allowance for Bad Debts?

• A) It is reported as a current liability.
• B) It is reported as an operating expense.
• C) It is reported as a separate, independent line item under current assets.
• D) It is shown as a contra account related to accounts receivable.

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Definitions:

Sunk Cost

An expense that has already been incurred and cannot be recovered, which should theoretically not influence any future financial decisions or strategies.

Expensed

The act of charging costs to expense accounts, recognizing them in the income statement in the period they were incurred.

Operation

In a business context, operation refers to the day-to-day activities necessary for running a company, which can include production, distribution, and the provision of services.

CCA Deductions

Refers to Capital Cost Allowance deductions in taxation, allowing businesses to claim depreciation on tangible capital assets.