Which Statement Is Not True in Relation to Bad Debts

question 8

Multiple Choice

Which statement is not true in relation to bad debts recovered?

• A) The accounts receivable should be re-established to maintain a complete history of the customer's activity and restore their credit rating.
• B) The recovery is recorded by effectively reversing the entry originally made to write off the receivable.
• C) The entry to reinstate the accounts receivable is DR Accounts receivable and CR Bad debts recovered.
• D) The entry made following reinstatement of the account receivable to record the recovery is DR Bad debts recovered and CR Accounts receivable.

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Definitions:

Capital Projects

Large-scale investment projects that are undertaken by organizations to build, maintain, or improve on their capital assets.

Payback Method

A simplistic financial analysis technique that calculates the time required for an investment to generate cash flows sufficient to recover its initial cost.

Replacement Chain Method

A capital budgeting decision tool that compares different projects by analyzing them over a common time period, particularly useful for comparing investments of different durations.

Equivalent Annual Annuity

A financial term that represents the annual cash flow from an investment over its lifespan, making it easier to compare different investments.