Question

In: Accounting

The statement that is incorrect is (select one). a. If a debtor fails to pay the...

The statement that is incorrect is (select one).

a. If a debtor fails to pay the receivable on it's due date this means that the debt is bad.

b. An outstanding debt may be turned over to a collection agency

c. Bad debts should be deducted as an expense in the same accounting period in which the credit sale was reconginised

d. Bad debits are a cost of selling on credits.

Solutions

Expert Solution

Statement 2 is true

When any debt is receivable the same can be forwarded to collecting agency for collection. Such collection is received and some commission is to be paid. Hence the statement is correct.

Statement 4 is correct.

Bad debits or bad debts are cost of selling on credits. When something is sold and not recovered the same is bad debt or bad debit. Such cost is cost of selling.

Now statement 1 and 3 are left.

There is a dispute here as both statements can be wrong.

Statement 1 says - debtors collection on due date is important. If the same is not collected then there is a default. Such default makes it bad. But a time period is allowed for rectifying the defaults before it is classified as bad debts.

Similarly, bad debts cannot be expensed out in same period as income is recognised since, some time period is to be given to complete the payment. Such payments can be beyond the financial year period. Hence it is not possible to expense the bad debt in same period as income.

Hence, both the statements can be wrong.

But, statement 3 is wrong on a larger scale, as expensing the bad debts in same year as income is not possible.

Statements 1 is still correct and due date payment if not made, makes is bad debt. Though the same may be recovered, but still classified ad bad debts due to its default.


Related Solutions

Select the INCORRECT statement.
Select the INCORRECT statement. The purpose of legally allowing LLC, LLPS, and S Corps is to promote economic development. The financial objective of the firm is to maximize revenues. S corporations are not double-taxed like regular "C" corporations. The Board of Directors determines management compensation.
Select the incorrect statement about ADH. Select one: a. It stimulates reabsorption of water b. It...
Select the incorrect statement about ADH. Select one: a. It stimulates reabsorption of water b. It is not secreted if the body consumes large amounts of water c. It is secreted if the body fluids become hypertonic d. It is produced by the distal tubule e. It is also called vasopressin
Which of the following statement is incorrect? Select one: a. Calvin Klein, Liz Claiborne, The Gap,...
Which of the following statement is incorrect? Select one: a. Calvin Klein, Liz Claiborne, The Gap, and other garment industry companies that manufacture clothing outside of the United States to control labor costs must balance the moral issues of human rights against their obligations to stockholders. b. Psychological and political factors also affect exchange rates. c. Most of the answers are correct. d. When the U.S. dollar strengthens against the Mexican peso, U.S. importers of Mexican goods will require more...
Which of the following statement is incorrect? a. A given amount of money you must pay...
Which of the following statement is incorrect? a. A given amount of money you must pay out today is a greater burden than the same amount paid in the future. b. Most of the answers are correct. c. With an amortized loan, the amount of interest increases each year, and the amount contributed to principal decreases each year. d. With an amortized loan, the amount of interest decreases each year, and the amount contributed to principal increases each year. e....
Interferons (select the INCORRECT statement) Interferons are components of the innate immune system that are produced...
Interferons (select the INCORRECT statement) Interferons are components of the innate immune system that are produced in response to a viral infection. The gene that encodes a given interferon molecule is present in the viral genome and is introduced into the host cell when a virus infects that cell. Interferons act in a paracrine manner and bind to cell surface receptors on neighboring host cells. Activation of interferon receptors on a host cell leads to the expression of antiviral proteins...
Which of the following statements is INCORRECT? At the neuromuscular junction: Select one: A. The size...
Which of the following statements is INCORRECT? At the neuromuscular junction: Select one: A. The size of the synaptic cleft averages 30-50nm. B. The post-synaptic potential can be excitatory or inhibitory C. Acetylcholine is released from vesicles housed in the presynaptic membrane D. The post-synaptic membrane is highly folded
Renal physiology (select the INCORRECT statement) Vasopressin regulates the permeability of the apical membrane of collecting...
Renal physiology (select the INCORRECT statement) Vasopressin regulates the permeability of the apical membrane of collecting duct cells by increasing the exocytosis of aquaportin-2 vesicles. Vasopressin is synthesized by hypothalamic neurons with long axons that extend into the anterior pituitary. The vasopressin receptor on renal collecting duct cells is a G protein-coupled receptor located on the basolateral membrane. A person with central diabetes insipidus could be therapeutically managed with injections of vasopressin.
single choice Select the incorrect statement about phased approach for the site characterization A.   A fixed...
single choice Select the incorrect statement about phased approach for the site characterization A.   A fixed work plan must be strictly followed in the phased approach. B.   The on-site interpretation of obtained data can be conducted in the phased approach. C.   A fixed offsite laboratory is needed for the chemical analysis on the collected samples D.   Compared with phase I, same sampling strategy, field investigation method and analytical methods are adopted in phase II and subsequent phases. Which of the...
Which of the following is INCORRECT? Select one: a. Momentum accompanied by lower trading volume is...
Which of the following is INCORRECT? Select one: a. Momentum accompanied by lower trading volume is stronger and more sustained than momentum with higher trading volume b. Price momentum is more sustained and stronger for higher growth companies with higher price to book ratios than for more mature companies with lower price to book ratios c. In general, investors like negative skewness and they do not like positive skewness in returns. d. Option B and Option C e. Option A...
Which of the following statements is INCORRECT? Select one: a. A Common-size balance sheet is a...
Which of the following statements is INCORRECT? Select one: a. A Common-size balance sheet is a balance sheet with each line item expressed as % of total assets. b. Managers need to understand financial statement analysis to understand investment, financing, operating, and reporting decisions. c. The ratios that you calculate when conducting ratio analysis are defined by the FASB. d. Trend statements help you examine patterns of financial statement line items over time. How do you interpret “Days inventory held”?...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT