The Direct Write-Off Method Is Generally Not Permitted for Financial

question 62

Multiple Choice

The direct write-off method is generally not permitted for financial reporting purposes because:

• A)Compared to the allowance method,it would allow greater flexibility to managers in manipulating reported net income.
• B)This method is primarily used for tax purposes.
• C)It is too difficult to accurately estimate future bad debts.
• D)Expenses (bad debts)are not properly matched with the revenues (credit sales)that they help to generate.

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Definitions:

Bowed Shape

A term describing the concave shape of the Production Possibilities Frontier (PPF), highlighting increasing opportunity costs as production shifts from one good to another.

Diminishing Returns to Scale

A situation where, after a certain point, additional inputs result in less proportional increases in output.

Technological Change

The introduction of new technologies and methods that increase productivity and may lead to economic growth and changes in how industries operate.

Labor Productivity

An indicator of economic efficiency that evaluates the quantity of goods and services generated relative to the hours of labor required to produce them.