Chapter 9: Accounting for Receivable

GAAP requires______________________ for financial reporting purposes when bad debts are material in amount

• Direct write-off method

• Allowance method

unless bad debt losses are insignificant, _____________ is not acceptable for financial reporting purposes.

• Direct write-off method

• Allowance method

Companies close Allowance for Doubtful Accounts at the end of the fiscal year.

• True

• False

A write-off under allowance method only affects

• Balance sheets account

• Income Statement

• Owner's Equity Statement

• Not in above

Under the allowance method, companies debit every bad debt write-off to the allowance account rather than to Bad Debt Expense.

• True

• False

the recovery of a bad debt, like the write-off of a bad debt, affects only

• Balance sheets account

• Income Statement

• Owner's Equity Statement

• Not in above

Percentage-of-Sales basis of estimating uncollectible emphasizes the matching of expenses with revenues

• True

• False

When the company makes the adjusting entry, it regards the existing balance in Allowance for Doubtful Accounts.

• True

• False

The amount of the bad debt adjusting entry is the difference between the required balance and the existing balance in the allowance account.

• True

• False

Notes receivable give the holder a weaker legal claim to assets than do accounts receivable.

• True

• False