Bad Debt Expense Is Recognized in the Same Accounting Period

question 45

Multiple Choice

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

• A) the accounts receivable asset should be stated at original cost.
• B) the exact amount of the losses from bad debts is known.
• C) revenues should be stated at realizable value.
• D)all costs incurred in the current period should be subtracted from current period revenues.

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Definitions:

Investment

The act of allocating resources, usually capital, to generate a return, which can include ventures in stocks, bonds, or physical assets like real estate.

Contractionary Monetary Policy

A monetary policy strategy used by central banks to reduce inflation and cool an overheating economy, typically involving increasing interest rates and reducing the money supply.

Discount Rate

The fee in the form of an interest rate that commercial banks and similar depository organizations incur when they obtain loans from the lending establishment of their regional Federal Reserve Bank.

Required Reserve Ratio

The percentage of deposits that banks must hold in reserve and not lend out to ensure liquidity.