In determining the adequacy of the allowance for uncollectible accounts, the least reliance should be placed upon which of the following?
A) The credit manager's opinion.
B) An aging schedule of past due accounts.
C) Collection experience of the client's collection agency.
D) Ratios calculated showing the past relationship of accounts receivable to net credit sales.

Question

Quizplus · Accepted Answer

The credit manager's opinion may be biased and may not be based on actual collection experience or data analysis. It is important to base the allowance for uncollectible accounts on objective and reliable information such as an aging schedule, collection agency experience, and ratios calculated from past financial data.

In Determining the Adequacy of the Allowance for Uncollectible Accounts