Question

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach:

A. gives a reasonably correct statement of receivables in the balance sheet.
B. best relates bad debt expense to the period of sale.
C. is the only generally accepted method for valuing accounts receivable.
D. makes estimates of uncollectible accounts unnecessary.

Answer 1

Answer:

A. gives a reasonably correct statement of receivables in the balance sheet.

Explanation:

• As bad debts are related to the companies current assets that are receivables and are also referred to as the uncontrollable expenses and results for the nonpayment of the delivered good and the services

• Hence the correct method to show this is through the balance sheets clarify on the amounts of the outstanding accounts receivables and payment made.