Which of the following is most likely to be used in determining a proper amount to be included in the allowance for doubtful accounts?
A)Accounts receivable divided by Cost of goods sold.
B)Aging of accounts receivable.
C)Cash Sales divided by Accounts receivable.
D)Year 2 accounts receivable compared to year one accounts receivable.

Question

Quizplus · Accepted Answer

The aging of accounts receivable is a common method used to determine the proper amount to be included in the allowance for doubtful accounts. This involves categorizing accounts receivable based on the length of time they have been outstanding and applying a percentage based on historical experience or industry norms for the likelihood of non-payment. This method provides a more accurate estimation of the allowance needed compared to other options listed.

Which of the Following Is Most Likely to Be Used