Once a CPA Has Determined That Accounts Receivable Have Increased

question 36

Multiple Choice

Once a CPA has determined that accounts receivable have increased due to slow collections in a "tight money" environment,the CPA would be likely to:

• A)Increase the balance in the allowance for bad debts accounts.
• B)Review the going concern ramifications.
• C)Review the credit and collection policy.
• D)Expand tests of collectibility.

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Definitions:

Administrative Expenses

Overhead or general expenses related to the day-to-day running of a business, which do not directly tie to producing goods or services.

Total Expenses

The sum of all costs and expenses incurred by a business during a specific period, including operating and non-operating costs.

Planning Budget

A budget prepared for a specific level of activity, detailing the expected revenues and expenses to guide financial planning.

Net Operating Income

A profitability measure calculated as the difference between a company's revenues from its operations and its operating expenses, excluding non-operating expenses and income.