Which of the following methods of handling bad debts often potentially leads to an overstatement of assets?
A) Percentage of credit sales method.
B) Ageing of accounts receivable method.
C) Direct write-off method.
D) Allowance for doubtful debts.

Question

Quizplus · Accepted Answer

The direct write-off method involves writing off specific bad debts as they become uncollectible. This method does not utilize an allowance account and can potentially lead to an overstatement of assets since the accounts receivable balance is not adjusted to reflect estimated uncollectible amounts.

Which of the Following Methods of Handling Bad Debts Often