Why are estimates of bad debts used to record uncollectible amounts of accounts receivable?
A)Doing so avoids violating the expense recognition ("matching")principle.
B)It is an easier method than waiting for accounts to actually become uncollectible.
C)Because the actual amount of uncollectible accounts can never be known.
D)It is the most conservative approach.

Question

Quizplus · Accepted Answer

To comply with the expense recognition ("matching")principle,a company needs to record bad debts in the same period as the sale.The only way to do this is to record an estimate of the amount of bad debts that are likely to arise.Later,the accounting records can be adjusted when uncollectible amounts become known with certainty.

Why Are Estimates of Bad Debts Used to Record Uncollectible