S1: The term “past due” refers to the period before the maximum credit term. S2: The rate for estimating doubtful accounts is usually determined using future experiences of the entity S3: Direct write off method does not require recognition for a doubtful account. S4: The unadjusted allowance for doubtful accounts is ignored in determining the doubtful account expense in percent of sale method. a. All statements are correct. b. All statements are incorrect. c. Only two statements are correct. d. Only one statement is correct. e. Only one statement is incorrect.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
S1: The term “past due” refers to the period before the maximum credit term. S2: The rate for estimating doubtful accounts is usually determined using future experiences of the entity S3: Direct write off method does not require recognition for a doubtful account. S4: The unadjusted allowance for doubtful accounts is ignored in determining the doubtful account expense in percent of sale method.
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