Question

Which of the following is NOT an example of aggressive accounting practices? Select one or more a. Recording contingent losses that are probable b. Using a lower estimate of bad debts. c. Recording research and development costs as assets d. Increasing the useful life used in calculating depreciation

Answer 1

Answer: a. Recording contingent losses that are probable

Explanation:

Aggressive Accounting strategies are methods of recording company activities that will make it appear as if the company is doing well financially. These include acts such as;

• Using a lower estimate of bad debts so that the bad debt expense deducted from income is less
• Recording research and development costs as assets so that they are not deducted as expenses from income.
• Increasing the useful life of assets in depreciation calculations so that the depreciation amount deducted from income is less.

Recording contingent losses that are probable on the other hand is a conservative accounting policy.