REVISION 1 : TOPIC 7,8&9[AR,INVENTORIES & NCA]

When the allowance method is used to account for uncollectible accounts, Bad Debt Expense is debited when

• a sale is made.

• an account becomes bad and is written off.

• management estimates the amount of uncollectibles.

• a customer's account becomes past-due.

When an account becomes uncollectible and must be written off,

• Bad Debt Expense should be credited.

• Allowance for Doubtful Accounts should be credited.

• Sales Revenue should be debited.

• Accounts Receivable should be credited.

Two methods of accounting for uncollectible accounts are the

• allowance method and the accrual method.

• direct write-off method and the accrual method.

• direct write-off method and the allowance method.

• allowance method and the net realizable method.

Two bases for estimating uncollectible accounts are:

• percentage of current assets and percentage of sales.

• percentage of assets and percentage of sales.

• percentage of receivables and percentage of sales.

• percentage of receivables and percentage of total revenue.

What are the double entries to record bad debt?

• dr. Bad Debt, cr. Allowance for Doubtful Debts

• dr. Profit and Loss, cr. Bad Debt

• dr. Bad debt, cr. Profit and Loss

• dr. Bad debt, cr. Accounts Receivable

What are the double entries to record a decrease in allowance for doubtful debts?

• dr. Accounts Receivables, cr. Allowance for doubtful debts

• dr. Bad debts, cr. Allowance for doubtful debts

• dr. Allowance for doubtful debts, cr. Decrease in Allowance for doubtful debts

• dr. Allowance for doubtful debts; cr. Accounts Receivables

• dr. Decrease in Allowance for doubtful debts, cr. Allowance for doubtful debts

What do we mean by inventories?

• Inventories are goods purchased for own used and held in a company warehouse

• Inventories are goods and services sold to customers in normal business operation

• Inventories are goods purchased for resale in the normal course of business

• Inventories are goods purchased for resale within the two years it was acquired

In perpetual inventory system

• the balance is adjusted at the end of the accounting period

• the balance of goods is constantly moving

• the ending inventory is only updated when the physical inventory is conducted

• is suitable for a small business

In the first-in, first-out (FIFO) method

• the last units acquired are the first units to be sold

• the last units acquired are the last units to be sold

• the first units acquired are the first units to be sold

• the first units acquired are the last units to be sold

The most outdated purchases included in the inventory value is found in the _________________ method.

• standard costs

• weighted average

• last-in, first-out (LIFO)

• first-in, first-out (FIFO)