Question

Which of the following is a correct statement? Multiple Choice Writing off an uncollectible account under the allowance method decreases net income. Writing off an uncollectible account under the direct write-off method does not affect net income. Estimating uncollectible accounts expense improves the matching of revenues and expenses. All of these are correct statements.

Answer 1

Answer:

Estimating un-collectible accounts expense improves the matching of revenues and expenses.

Explanation:

When uncollectibles are recorded through allowance method then, bad debts expense is provided, which reduces net income. But at the time of writing off only the allowance and accounts receivables account is affected and not the net income.

When direct method is used then also the net income gets reduced, as bad debt expense and accounts receivables is affected.

And as provided in first para, when estimating and creating the allowance for bad debts, it affects net income, and it also represents the true and fair view of expenses and income.

Thus, statement c is correct.