Question

Which of the following is most likely to be used in determining a proper amount to be included in the allowance for doubtful accounts?A. Accounts receivable divided by Cost of goods sold.B. Aging of accounts receivable.C. Cash Sales divided by Accounts receivableD. Year 2 accounts receivable compared to year one accounts receivable.

Answer 1

B. Aging of accounts receivable

Step-by-step explanation:

For determining the proper amount that would be included in the allowance for doubtful debts, the aging of account receivable is used because it told that in how many days, the amount would be collected through which the company can estimate its bad debts.

The accounts receivables arise when the business organization serves the goods and services to the customers on a credit basis, not on cash basis.

Hence, the most appropriate option is B.