Under the Direct Write-Off Method,recording an Estimate of Future Uncollectible

question 141

True/False

Under the direct write-off method,recording an estimate of future uncollectible accounts includes a debit to Bad Debt Expense and a credit to the Allowance for Uncollectible Accounts.

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance premiums.

Total Fixed Costs

Expenses that do not change with the level of production or sales over a short period, including rent, insurance, and salaries.

Activity Level

In cost accounting, this refers to the volume of production or operations, impacting variable costs and potentially influencing budgeting and performance measures.

Contribution Margin

The contribution margin is the difference between sales revenue and variable costs, showing how much revenue contributes to fixed costs and profit.