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Sergeeva-Olga [200]
2 years ago
6

he direct write-off method of accounting for uncollectible accounts a. emphasizes the matching of expenses with revenues. b. emp

hasizes balance sheet relationships. c. emphasizes cash realizable value. d. is not generally accepted as a basis for estimating bad debts.
Business
1 answer:
kolezko [41]2 years ago
7 0

The direct write-off method of accounting for uncollectible accounts

<u>d. is not generally accepted as a basis for estimating bad debts.</u>

Explanation:

  • A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account.
  • Rather, an account receivable is written-off directly to expense only after the account is determined to be uncollectible.
  • One method of recording the bad debts is referred to as the direct write off method which involves removing the specific uncollectible amount from accounts receivable and recording this as a bed debt expense in the income statement of the business.
  • The mechanics of the allowance method are that the initial entry is a debit to bad debt expense and a credit to the allowance for doubtful accounts (which increases the reserve).
  • The allowance is a contra account, which means that it is paired with and offsets the accounts receivable account
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The company's total cash payments in May is $195,500 and this can be determined by preparing a cash budget.

<h3>What is a cash budget?</h3>

A cash budget is a company's estimation of its cash inflows and outflows over a specified period of time. A cash budget provides a company with financial insight into its cash requirements, including shortages and surpluses.  The preparation of a cash budget helps the company to determine an efficient use of its available cash.

Data and Calculations:

                                                April            May           June            July

Anticipated sales             $300,000   $300,000   $300,000    $300,000

Purchases                           150,000    $150,000       150,000       150,000

Labor costs                           16,000        19,000         16,000          21,000

Fixed overhead                    12,000        12,000         12,000          12,000

General and admin. exp.      2,000          2,000          2,000           2,000

Interest expense                                       2,500

Equipment purchase                               10,000

Total cash payments in May             $195,500

Thus, the company's total cash payments in May is $195,500.

Learn more about cash budgets at brainly.com/question/8707644

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