Question 1

The estimated loss from uncollectible accounts can be based on net credit sales or ___________________.

Accepted Answer

accounts receivable

Question 2

To achieve good internal control over accounts receivable,it is important to separate the recording of accounts receivable transactions and the collection of cash from customers.

Accepted Answer

Separating the recording of accounts receivable transactions and the collection of cash from customers helps to ensure that there is an appropriate level of oversight and accountability, reducing the risk of errors or fraud. This is a key component of good internal control over accounts receivable.

Question 3

When using the allowance method,the collection of an account previously written off is recorded in the cash receipts journal only.

Accepted Answer

When using the allowance method, the collection of an account previously written off is recorded by reversing the entry made at the time of the write-off, which involves debiting accounts receivable and crediting the allowance for doubtful accounts. This is typically recorded in the general journal or a specialized journal for adjustments, not just in the cash receipts journal.

Question 4

The adjusting entry to record estimated losses from uncollectible accounts consists of a debit to Allowance for Doubtful Accounts.

Accepted Answer

The adjusting entry to record estimated losses from uncollectible accounts consists of a debit to Bad Debt Expense (or a similar expense account) and a credit to Allowance for Doubtful Accounts.

Question 5

The balance of Allowance for Doubtful Accounts is deducted from the balance of Accounts Receivable on the balance sheet.

Accepted Answer

This is true because the Allowance for Doubtful Accounts account is used to record estimated bad debt expenses, meaning it contains funds set aside for potentially uncollectible debts. As such, it is subtracted from the Accounts Receivable balance on the balance sheet to reflect a more accurate picture of the company's outstanding receivables that are expected to be collected.

Question 6

Allowance for Doubtful Accounts may,at times,have a debit balance.

Accepted Answer

Allowance for Doubtful Accounts is a contra-asset account that is used to offset the accounts receivable balance. Since the balance in the account represents an estimate of the amount of bad debts that the company may incur, it is possible for the allowance to have a debit balance if the estimate of bad debts is higher than the actual amount of bad debts that occur.

Question 7

When the estimate of the losses from uncollectible accounts is based on the aging method,the primary concern is proper valuation of the accounts receivable on the balance sheet.

Accepted Answer

The aging method is used to estimate the amount of uncollectible accounts, but it is dependent on the proper valuation of the accounts receivable on the balance sheet. Therefore, the primary concern when using this method is indeed the proper valuation of accounts receivable.

Question 8

The entry to record the write-off of a specific uncollectible account using the allowance method includes a ____________________ to Allowance for Doubtful Accounts.

Accepted Answer

The answer of The entry to record the write-off of...

Question 9

When there is a partial collection of a balance previously written off,the reinstatement entry will be for the entire amount of the write-off.

Accepted Answer

The reinstatement entry is only for the amount that is actually collected, not the entire amount of the write-off.

Question 10

When the allowance method of recognizing losses from uncollectible accounts is used,the net value of accounts receivable on the balance sheet will more nearly reflect the amount that will ultimately be collected.

Accepted Answer

The allowance method is designed to estimate and recognize the amount of uncollectible accounts, which is deducted from the total accounts receivable on the balance sheet. Therefore, the net value of accounts receivable will reflect a more accurate representation of the amount that is expected to be collected.

Question 11

The allowance method may be used to record bad debt losses for income tax purposes.

Accepted Answer

The allowance method is not allowed for income tax purposes because the IRS requires businesses to use the specific charge-off method to claim bad debt losses, where debts must be specifically identified as bad.

Question 12

After the adjusting entry is made to record the estimate of losses from uncollectible accounts,Allowance for Doubtful Accounts should have a(n)____________________ balance.

Accepted Answer

The answer of After the adjusting entry is made to...

Question 13

The adjusting entry to record estimated losses from uncollectible accounts includes a(n)____________________ to the Allowance for Doubtful Accounts account.

Accepted Answer

The answer of The adjusting entry to record estimated losses...

Question 14

The experience of other firms in the same line of business may be used in estimating losses from uncollectible accounts for a new firm.

Accepted Answer

This is because other firms in the same line of business may have faced similar situations and can provide valuable data on the average percentage of uncollectible accounts in the industry. This can help new firms estimate potential losses and make informed decisions about their credit policies.

Question 15

Allowance for Doubtful Accounts is a liability account.

Accepted Answer

Allowance for Doubtful Accounts is a contra asset account, which reduces the total amount of accounts receivable on the balance sheet to reflect the amount that is expected to be collected.

Question 16

Allowance for Doubtful Accounts may be used for the valuation of all types of receivables.

Accepted Answer

Allowance for Doubtful Accounts is a contra asset account that is used to estimate and account for the potential losses from uncollectible receivables. It is applicable to all types of receivables, including trade receivables, loans, and other debts.

Question 17

Uncollectible Accounts Expense can be called Loss from Uncollectible Accounts.

Accepted Answer

Uncollectible Accounts Expense and Loss from Uncollectible Accounts are two terms used interchangeably to refer to the expense incurred by a company due to customers not paying the money they owe.

Question 18

When losses from uncollectible accounts are provided for in advance,the entry to record the write-off of a particular customer's account includes a debit to Uncollectible Accounts Expense.

Accepted Answer

When losses from uncollectible accounts are provided for in advance, the entry to record the write-off of a particular customer's account should include a credit to the Allowance for Doubtful Accounts or Bad Debt Reserve account and a debit to Accounts Receivable. This reduces the balance in the Accounts Receivable account and recognizes the fact that the amount owed by the customer is unlikely to be collected. The debit to Uncollectible Accounts Expense is made only when the actual bad debt expense is incurred, such as at the end of an accounting period when the allowance for doubtful accounts is adjusted based on the estimated percentage of uncollectible accounts.

Question 19

The practice of estimating losses from uncollectible accounts before specific accounts become uncollectible is referred to as the ____________________ method.

Accepted Answer

The answer of The practice of estimating losses from uncollectible...

Question 20

The longer an account is past due,the ____________________ likely it is to be collected.

Accepted Answer

The answer of The longer an account is past due,the...

Quiz 15: Accounts Receivable and Uncollectible Accounts