Under the Income Statement Method of Estimating Likely Bad Debts

question 40

Multiple Choice

Under the income statement method of estimating likely bad debts:

• A) an estimate of bad debts is made by the accountant.
• B) a percentage, based on past experience, is applied to profit.
• C) accounts receivable are 'aged' to establish likely bad debts.
• D) a percentage, based on past experience, is applied to credit sales.

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Definitions:

Increase Information Load

This refers to the process of augmenting the amount and complexity of information that an individual or system must process.

Common Information Effect

The tendency for group members to focus and overemphasize information held in common by all or most group members while undervaluing unique information.

Information Manager

A person or tool responsible for the structured collection, management, and distribution of information within an organization.

Pooled Information

The aggregation of data or knowledge from multiple sources for joint consideration or analysis.