When Using the Allowance Method,after a Company Has Previously Written

question 191

Multiple Choice

When using the allowance method,after a company has previously written off an account,________.

• A) the company continues to send monthly statements to the customers whose accounts have been written off
• B) the company cannot collect from these customers because their accounts have been written off
• C) when a customer pays on an account that has been written off, the company needs to reverse the write-off to the Allowance for Bad Debts account and then record the receipt of cash
• D) the company does not need to reestablish the receivable account

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Definitions:

Implicit Costs

The opportunity costs that arise from using resources that could have been employed in an alternative use but were instead utilized in the current operation without direct payment.

Explicit Costs

Direct, out-of-pocket payments for goods and services used in the production of a product or provision of a service.

Accounting Profit

The difference between total monetary revenue and total monetary costs, excluding the consideration of opportunity costs.

Explicit Costs

These are the direct, clear expenses related to business operations, such as salaries, utilities, and rent, that are easily quantifiable.