Bad debt expense is an income statement account that shows the losses incurred due to uncollectible receivables. It is also important to be aware of that the amount to be reflected as an asset on the balance sheet because some receivables might become bad or will be uncollectible. Hence, in order to ensure that account receivables are not overstated on the balance sheet, they are reported in their cash (net) realizable value. As mentioned before, this value deducts the amounts that the business expects it might not be able to get from its receivables. Therefore, out of receivables, the estimated uncollectible amounts are reduced and then reported on the balance sheet. 

In income statement there are items such as sales, cost of goods sold and operating expenses. The correct choice is E

Based on their operations, companies are classified into three categories as “service companies”, “manufacturing companies”, and “merchandising companies”. The correct choice is E.

Promissory note is a written agreement or a commitment to pay a particular amount of promised money at a particular period of time

Internal Control-Integrated Framework is revised and republished in 2013.

According to text dotted place should be  Disclosure Principle

The specific identification method uses the specific cost of each inventory unit to determine ending inventory and cost of goods sold. Specific identification requires that companies keep records of the original cost of each individual inventory item.?

Cash (net) realizable value shows the credit sales price adjusted for returns, discounts, and allowances expected to be collected from customers.

When this merchandise inventory is sold, the revenue is reported as sales revenue, and its cost is recognized as an expense called the cost of merchandise sold.

When the company sells its goods or services on cash basis, there would be no need to consider for accounts receivables. In such a case, cash account is debited; the sales revenue account is credited. As we have mentioned before, if the company sells its goods and services on credit, then it has to debit accounts receivables. The correct answer is D.

The consistency principle holds that companies should use the same accounting methods and procedures in each accounting period, so that the information provided will help investors and creditors to compare a company’s financial statements from one period to the next.

To achieve effective controls on cash payment, it should be verified, approved and recorded. In this process, companies usually use a “voucher system.”

A retailer buys merchandise inventory either from a producer or a wholesaler and then sells those goods to consumers.

Work in Process Inventory reports the cost of goods, materials and other components of manufacturing process used for the inventory which are still in production process, in other words unfinished at the time financial statements are prepared.

Average collection period is the average amount of time that a receivable payment is outstanding and is calculated as 365 days divided by receivable turnover ratio. The correct answer is A.

A company must perform strictly proper accounting only for items that are significant to the business’s financial situation according to the materiality concept requirements.

Barbershop market is a merchandising company.

The components of fraud triangle are pressure, opportunity, and rationalization.

Generally, receivables are classified into three main categories: (1) accounts receivables, (2) notes receivables, and (3) other receivables.