This year Beta Business tried calculating its bad debts expense two different ways.Using a percentage of credit sales,bad debts expense would be $2,500.Based on an aging of accounts receivable,however,bad debts expense would be $2,750.If Beta Business decides to report $2,500 of bad debts expense,this accounting choice would be considered ________.

Question

Quizplus · Accepted Answer

Choosing the lower estimate for bad debts expense ($2,500) instead of the higher estimate ($2,750) makes the company's financial condition appear better than it might actually be. This approach is considered aggressive accounting because it optimistically reports lower expenses and higher income.

This Year Beta Business Tried Calculating Its Bad Debts Expense