Question

For billing and collection purposes, a company will internally keep a separate accounts receivable account for each customer called a:

A) customer record.

B) subsidiary account.

C) subsidiary ledger.

D) debit memorandum.

Answer: B

Feedback: For billing and collection purposes, a company will keep a separate accounts receivable account (called a subsidiary account) for each customer.

41 . Assume the Hart Company uses the allowance method. When the company writes off a customers account balance that has no chance of collection:

A) total assets will decrease.

B) total liabilities will increase.

C) expenses and revenues will both increase.

D) total assets will decrease and expenses will increase.

Answer: D

Feedback: When the allowance method is used and a customer account is written off, a decrease is recorded in Accounts Receivable, which is offset by a decrease in the contra-account, Allowance for Doubtful Accounts. The decrease in Accounts Receivable decreases total assets, while the decrease in the Allowance for Doubtful Accounts increases total assets. As a result, total assets do not change. A write-off does not affect liabilities, revenues, or expenses.

Answer

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