Accounting Chapter 20

Canceling the balance of a customer account because the customer does not pay is called writing off an account.

True

Crediting the estimated value of uncollectible accounts to a contra account is called the allowance method of recording losses from uncollectible accounts.

True

Risk of loss occurs when a business sells on account.

True

The difference between an asset's account balance and its related contra account balance is called its book value.

True

The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts, is called book value of Accounts Receivable.

True

The realization of revenue accounting concept explains why failing to collect an account at a later date than the original sale cancels the sale and reduces revenue.

True

When a customer account is written off under the allowance method, book value of accounts receivable decreases.

False

When a previously written-off account is collected, Accounts Receivable is both debited and credited for the amount collected.

False

Allowances for Uncollectible Accounts is a contra account to its related asset account, Accounts Receivable.

True

Using the percentage of total sales on account to estimate uncollectible accounts expense assumes that a portion of every sale on account dollar will become uncollectible.

True

When an account is written off, the account balance is transferred to Allowance for Uncollectible Accounts

True

When an adjusting entry for uncollectible accounts expense is recorded, Allowance for Uncollectible Accounts is credited.

True

Accounts Receivable is debited to write off a customer account.

False

Estimating the percentage of uncollectible accounts expense in the same period as the sales revenue is an application of the Realization of Revenue accounting concept.

False

The amount of accounts receivable that is uncollectible decreases revenue.

False

Recorded adjusting entry for uncollectible accounts expense

general journal; uncollectible accounts expense debited, allowance for uncollectible accounts credited

Accounts receivable that cannot be collected are called uncollectible accounts.

True

Allowance for Uncollectible Accounts is debited to write off a customer account.

True

A business usually knows at the time sales are made which customer accounts will become uncollectible.

False

The balance of the account Allowance for Uncollectible Accounts is extended to the Income Statement Credit column of the work sheet.

False

A business generally sells on account to encourage sales.

True