When Comparing the Allowance Method of Accounting for Bad Debts

question 60

Multiple Choice

When comparing the allowance method of accounting for bad debts with the direct write-off method,which of the following is true?

• A) The direct write-off method is exact and also better illustrates the matching principle.
• B) The allowance method is less exact but it better illustrates the matching principle.
• C) The direct write-off method is theoretically superior.
• D) The direct write-off method requires two separate entries to write off an uncollectible account.

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Definitions:

Linear Production

A production process where there is a constant ratio of inputs to outputs, typically represented by a straight line in graphical analysis.

Cabbages

Leafy green, red, or white biennial plants grown as cool-season vegetables, often used in salads and other dishes.

Opportunity Cost

The overlook of beneficial possibilities from various options due to the selection of a singular alternative.

Tons

A unit of weight equivalent to 2,000 pounds (US) or 1,000 kilograms (metric ton).