When a Company Is Using the Direct Write-Off Method and an Account

question 64

Multiple Choice

When a company is using the direct write-off method and an account is written off,the journal entry consists of a:

• A)credit to Accounts receivable and a debit to Interest expense.
• B)debit to Accounts receivable and a credit to Cash.
• C)credit to Accounts receivable and a debit to Bad debts expense.
• D)debit to the Allowance for doubtful debts and a credit to Accounts receivable.

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Definitions:

Potential Output

The highest level of real GDP that an economy can achieve when it is operating at full capacity, without causing inflation.

Recessionary Gap

A situation where an economy's real GDP is lower than its potential GDP, leading to underutilized resources and higher unemployment.

Potential Output

The maximum amount of goods and services an economy can produce when it is using all of its resources efficiently.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable, often due to market failure or intervention.