Question

an allowance for doubtful accounts is established to write down the value of accounts receivable to the value actually expected to be collected? A) conservatism; B) cost(as in cost/benefit); C) monetary unity; D) full disclosure; E) economic entity; F) periodicity; G) conservatism;

Answer 1

Conservatism is the approach due to which an allowance for doubtful accounts is established to write down the value of accounts receivable to the value actually expected to be collected.

The Conservatism principle suggests that a business should anticipate and record all the future losses rather than future gains. It recognizes all the expenses and liabilities as soon as there comes the possibility when there is uncertainty regarding the realisation. Allowance for doubtful accounts is also such provision recorded when the business anticipates they will not realize some of the accounts receivable.

Therefore, option A) conservatism is the correct answer.

All the other options are irrelevant in the given situation therefore, ignored. Option A & G are the same.