Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 6 - No. 28)
What is the effect on net income if the company underestimates the allowance for doubtful accounts?
Net income is overstated.
Net income is understated.
Net income is unaffected.
Cannot be determined.
Explanation
Underestimating the allowance will lead to an overstatement of net income because bad debt expense will be too low.
Comments (0)
