One of the Weaknesses of the Direct Write-Off Method Is

question 177

Multiple Choice

One of the weaknesses of the direct write-off method is that it

• A) understates accounts receivable on the balance sheet
• B) violates the matching principle
• C) is too difficult to use for many companies
• D) is based on estimates

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Definitions:

Stock Dividend

A distribution of additional shares of a company's stock to its shareholders at no extra cost.

Stock Split

A corporate action increasing the number of shares issued and outstanding, by issuing more shares to current shareholders proportionally, effectively reducing the price per share.

Common Stockholders

Individuals or entities that own a portion of a corporation's equity and have voting rights based on their share ownership.

Shares Outstanding

The total number of shares of a company's stock that are currently owned by investors, including those held by the public as well as restricted shares owned by the company's insiders and employees.