A Company Has Significant Bad Debts

question 92

Multiple Choice

A company has significant bad debts.Why is the direct write-off method unacceptable?

• A)Direct write-offs would be immaterial.
• B)It is not allowed for tax reasons.
• C)It is not in accordance with the accrual method of accounting.
• D)Assets will be understated on the balance sheet.

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Definitions:

Save

The process of setting aside a portion of current income for future use or investment.

Obtrusively Expensive

Describing an item or service whose price is excessively high, attracting attention in a way that may seem offensive or overt.

Wealth

The abundance of valuable resources or material possessions, or the control of such assets.

Honor

The quality of being honest and having strong moral principles; a sense of moral uprightness.