Multiple Choice
What does it mean when a firm has a days' sales in receivables of 45?
23
views
7. Receivables and Investments
Net Accounts Receivable: Direct Write-off Method
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following does NOT reduce the balance in Accounts Receivable under the direct write-off method?
A
Collecting cash from a customer
B
Writing off an uncollectible account
C
Estimating bad debts expense at year-end
D
Recording a sales return
Verified step by step guidance1
Understand the direct write-off method: Under this method, bad debts are written off directly when they are deemed uncollectible, and no allowance for doubtful accounts is created. This method impacts Accounts Receivable only when specific accounts are written off.
Analyze the impact of collecting cash from a customer: When cash is collected, the Accounts Receivable balance decreases because the customer has paid their outstanding balance.
Examine the effect of writing off an uncollectible account: Writing off an uncollectible account directly reduces the Accounts Receivable balance because the account is removed from the ledger.
Consider estimating bad debts expense at year-end: Estimating bad debts expense does not directly affect the Accounts Receivable balance under the direct write-off method. This is because no adjustment is made to Accounts Receivable until specific accounts are written off.
Review the impact of recording a sales return: Recording a sales return reduces Accounts Receivable because the customer is no longer obligated to pay for the returned goods.
5:59mWatch next
Master Net Accounts Receivable: Direct Write-off Method with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Net Accounts Receivable: Direct Write-off Method practice set
Problem sets built by lead tutorsExpert video explanations