Little uniformity is found on statements of income with respect to classification of bad debt expense, but the circumstances in a given situation may indicate that some particular classification is appropriate. If the credit and collection function is under the sales department, bad debt expense should be classified as a:
A) administrative expense.
B) financial expense.
C) selling expense.
D) manufacturing expense.

Question

Quizplus · Accepted Answer

Bad debt expense should be classified as a selling expense if the credit and collection function is under the sales department. This is because selling expenses are directly related to the process of selling goods and services, and bad debt is a result of extending credit to customers. Therefore, it is closely linked to the sales function.

Little Uniformity Is Found on Statements of Income with Respect