Chapter 8

advantages of extending credit

• increases sellers revenues

• helps customers buy products

• increases wage costs

• increases bad debt costs

disadvantages of extending credit

• bad debt costs

• increases wage costs

• delayed receipt of cash

• increases customer loyalty

The allowance method reduces accounts receivable and net income for an estimate of uncollectible accounts (bad debts)

• True

• False

what are the two methods for estimating bad debts

the sale of goods/services on credit

• accounts receivable

• notes receivable

• allowance method

• notes payable

promises that require other parties to pay your business according to written agreements

• accounts receivable

• notes receivable

• allowance method

• notes payable

A subsidiary account is an internal separate accounts receivable account for each customer.

• True

• False

The allowance method has a normal ______ balance.