Uncollectible accounts expense:
A)Should not occur if the credit department properly investigates prospective customers who wish to purchase merchandise on credit.
B)Is the amount of cash a business must pay each time a credit customer fails to pay his or her account.
C)Is the amount a business must pay to a collection agency to recover amounts on overdue accounts receivable.
D)Represents the loss in value of accounts receivable that are estimated to be uncollectible.

Question

Quizplus · Accepted Answer

Uncollectible accounts expense represents the loss in value of accounts receivable that are estimated to be uncollectible. Option A is incorrect because even if the credit department investigates prospective customers, there is still a chance that some customers may not be able to pay their debts. Option B is incorrect because uncollectible accounts expense is not the amount of cash that a business must pay each time a credit customer fails to pay their account. Option C is incorrect because the amount a business must pay to a collection agency to recover overdue accounts receivable would be classified as a collection expense, not an uncollectible accounts expense.

Uncollectible Accounts Expense