The Allowance for Doubtful Accounts is necessary because when recording uncollectible accounts expense, it is a. not possible to know which specific accounts will not pay. b. uncollectible accounts that are written off must be accumulated in a separate account. c. a liability results when a credit sale is made. d. management needs to accumulate all the credit losses over the years.

Question

Business

Boston

10 September, 05:54

The Allowance for Doubtful Accounts is necessary because when recording uncollectible accounts expense, it is a. not possible to know which specific accounts will not pay. b. uncollectible accounts that are written off must be accumulated in a separate account. c. a liability results when a credit sale is made. d. management needs to accumulate all the credit losses over the years.

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Gilberto Woods · Answer 1

A) not possible to know which specific accounts will not pay.

Explanation:

Even large corporations that check the credit history of the buyers that request some type of sales credit may make mistakes and sell products to an individual or a company that doesn't pay them. Even banks which are in the lending business sometimes lend money that can't be collected.

Many times you can estimate what percentage of your sales with be bad debt due to previous experience, but you are estimating (or making an educated guess).

The only way that you can be 100% sure that you will collect all your sales is when you don't sell anything on credit, only cash accepted.