Question

Some indications an account may be uncollectible include __________.

(choose all that apply):
a. The customer closes its business.
b. The customer moves to a bigger location.
c. The customer does not respond to the company's attempt to collect.
d. The customer files for bankruptcy.
e. The company hires more employees.

Answer 1

Options (a), (c) and (d)

Step-by-step explanation:

Uncollectible accounts refer to those accounts receivables which have gone bad and doubtful and from whom the possibility of collection/recovery is next to nil. Some of the credit sales will always be uncollectible regardless of how carefully a company frames it's credit policies.

Uncollectible accounts are usually referred to as bad debts.

There are some indications which make an enterprise classify some accounts as uncollectible, some of which are:

1. The debtor is incurring heavy losses and on the verge of business shutdown.

2. The debtor stops responding to company's mails and calls and other means, seeking payment from him.

3. The debtor has gone bankrupt or insolvent and has filed for bankruptcy.

4. The debtor closes or shuts down his business operations.