Under the Allowance Method, When a Receivable That Had Been

question 60

Multiple Choice

Under the allowance method, when a receivable that had been previously written off is collected:

• A) Income is recognized.
• B) An expense is reduced.
• C) Profit is not affected.
• D) Net assets are increased.

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Definitions:

Commercial Banks

Commercial banks are financial institutions that accept deposits, offer checking account services, and make loans to individuals and businesses.

Reserve Requirements

Regulations set by central banks determining the minimum amount of reserves that must be held by a commercial bank.

Checkable Deposit Liabilities

These are bank account deposits that are immediately available to make payments and transfers, typically seen in checking accounts.

Excess Reserves

Funds that banks hold over and above the required minimum reserves set by the central bank, available for lending or investment.