An account becomes uncollectible

An account becomes uncollectible a. when an account receivable is converted into a note receivable b. There is no general rule for when an account becomes uncollectible. c. when a discount is availed on notes receivable d. at the end of the fiscal year

The correct answer is letter “B”: There is no general rule for when an account becomes uncollectible. Explanation: Accounts Uncollectible represent any form of debt as a result of sales on credit that are likely not to be paid. Before classifying debt as uncollectible there is an unset timeframe that may go by. At first, the sale on credit is considered an account receivable with a payment promise usually of 30 or 90 days. If three month passes but no payment is received, the account is considered aged receivables but if more time goes through without payment, the account then is labeled as doubtful. Doubtful accounts become allowances if the company decides to take care of the payment of the debt with its own profit. There is no set rule when an account receivable becomes uncollectible. It relies on the judgment of the firm.

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C – there is no general rule for when an account becomes uncollectible Explanation: Account uncollectible are receivables or debts that have no probability of being settled either because of bankruptcy of the debtor or as a result of fraud commited by the debtor.

direct write off method and allowance method

b. There is no general rule for when an account becomes uncollectible. Explanation: Accounts uncollectible are the debts and loans which do not have any chance of being paid. There are many other reasons by which the account becomes uncollectible. The inability of the debtor, the bankruptcy of the debtor and the fraud conducted by the debtor are some of the reasons why accounts become uncollectible.

The correct answer is C. there is no general rule for when an account becomes uncollectible Explanation: An account receivable becomes uncollectible according to the policy established by the company. For example, the company can set a time limit, you can send the account to be attempted by a third party or even take legal action before considering an account as bad

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The correct word for the blank space is: expense recognition principle. Explanation: The expense recognition principle establishes when expenses and revenues must be recorded in the accounting books of a company. Under the accrual basis of accounting method, revenues are recognized when earned and expenses whenever consumed. While using the cash basis accounting method, revenues are recognized when earned and expenses when they are paid to suppliers not when invoices are sent. In both cases, expenses and revenues are recognized during the same period when they take place. That is the reason why the direct write-off method fails to fulfill the expense recognition principle because bad debt can be recognized as an uncollectible account not necessarily in the same period where the debt instrument was issued.

The direct write-off method violates the matching principal, which says that revenues and expenses are recorded in period that they occur (not necessarily when they are collected/written off).

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There is no general rule for when an account becomes uncollectible. Explanation: An account becomes uncollectible when an account receivable is written-off due to different situations, which means that there is no general rule for when an account becomes uncollectible. For example, an account can become uncollectible if the debtor becomes unsolvent. It can also become uncollectible if the firm is victim of fraud, or if the firm itself decides to write-off the account due to company policy.

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