Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

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Multiple Choice

Which of the following statements regarding the allowance method for uncollectible accounts is FALSE?

The allowance method matches bad debt expense to the period in which the related sales are made.

The allowance for doubtful accounts is a contra-asset account that reduces accounts receivable on the balance sheet.

When a specific account is written off, total assets decrease.

The allowance method requires an estimate of uncollectible accounts at the end of each period.

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Verified step by step guidance

Understand the allowance method for uncollectible accounts: This method is used to estimate and record bad debt expense in the same period as the related sales, adhering to the matching principle in accounting.

Recognize that the allowance for doubtful accounts is a contra-asset account: It reduces the accounts receivable balance on the balance sheet to reflect the expected uncollectible amounts.

Analyze the statement about writing off specific accounts: When a specific account is written off under the allowance method, the reduction in accounts receivable is offset by a reduction in the allowance for doubtful accounts. Therefore, total assets remain unchanged.

Review the requirement for estimating uncollectible accounts: At the end of each period, an estimate of uncollectible accounts is made to adjust the allowance for doubtful accounts and record bad debt expense.

Identify the false statement: Based on the analysis, the statement 'When a specific account is written off, total assets decrease' is false because the write-off does not affect total assets under the allowance method.