The basis of computing uncollectible accounts that provides a reasonable matching of expenses with revenues is the:
A) percentage-of-receivables basis.
B) percentage of doubtful accounts basis.
C) lower of cost or market basis.
D) direct write-off method.

Question

Quizplus · Accepted Answer

The percentage-of-receivables basis estimates uncollectible accounts as a percentage of outstanding accounts receivable. This approach provides a reasonable matching of expenses with revenues because it recognizes expected uncollectible accounts at the same time revenues are recognized. Option B is incorrect because it refers to a similar approach, but it is not the most commonly used. Option C is incorrect because it relates to valuing inventory, not estimating uncollectible accounts. Option D is incorrect because it does not provide a reasonable matching of expenses with revenues, as it only recognizes bad debts when they are deemed uncollectible.

The Basis of Computing Uncollectible Accounts That Provides a Reasonable