Underestimating the allowance for uncollectible accounts can shift income from future periods into the present period.

Name: Underestimating the allowance for uncollectible accounts can shift income from future periods into the present period.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

By underestimating current accounts receivable provisions, current income increases because expenses are reduced. However, due to the underestimation, future year provisions will need to increase to compensate, thus lowering future profitability.

Underestimating the Allowance for Uncollectible Accounts Can Shift Income from Future