In Relation to the Direct Write-Off Method of Accounting for Bad

question 22

Multiple Choice

In relation to the direct write-off method of accounting for bad debts,it is not true that:

• A)Bad debts are charged as an expense at the time an account is determined to be uncollectable
• B)The entry to write off bad debts is debit Bad Debts Expense,debit GST collected,credit Accounts Receivable
• C)There is no contra asset account for estimated doubtful debts
• D)Bad debts expense is recorded in the same period in which its related sales revenue is included as income

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Definitions:

Residual Claimant

An individual or entity entitled to a share of a company's assets only after all debts and other obligations have been met in the event of liquidation.

Unlimited Liability

A legal structure wherein the business owners are personally responsible for all the debts and liabilities of the business.

Voting Rights

The rights of shareholders to vote on company matters, typically exercised at annual meetings and proportional to the number of shares held.

Dividend Paid

The portion of earnings a company distributes to its shareholders, typically expressed as a dollar amount per share.