CH5 CONCEPT REVIEW

The percentage-of-receivables method is sometimes referred to as the balance sheet method, because we base the estimate of bad debts on an amount found in the balance sheet.

True

Trade discounts represent:

a reduction in the listed price of a good or service.

According to the allowance method, writing off an account receivable will include a:

credit to Accounts Receivable

A company will debit ___________ when recording a credit sale.

Accounts Receivable

Sales Returns is an example of a(n) ____________ account, which is used to keep a record of reductions from revenue due to sales returns separate from total revenue itself.

Contra revenue

A debit balance in the Allowance for Uncollectible Accounts before year-end adjustment indicates that the company wrote off more bad debts in the current year than it had estimated.

True

The allowance method is required by GAAP for financial reporting purposes.

True

The balances in sales returns, allowances, and discounts are subtracted from total revenues when calculating net revenues.

True

The direct write-off method is used for tax purposes but is generally not permitted for financial reporting.

True