PUT IT ON PAPER Discussion Questions 1. When should sales revenues be recognized and 5. Why does the accounting profession require reported? the use of the allowance method of accounting 2. Why do you think misstatement of revenues for losses due to bad debts rather than the (e.g., recognizing revenues when the rewards direct write-off method? and significant risks of owning the goods have 6. With the allowance method, why is the net not been transferred to the buyer) is one of balance, or net realizable value, of Accounts the most common ways to manipulate financial Receivable the same after the write-off of a statements? receivable as it was prior to the write-off of the 3. Why is it important to have separate sales uncollectible account? returns and allowances and sales discounts 7. Why is the "aging of accounts receivable accounts? Wouldn't it be much easier to usually more accurate than basing the estimate directly reduce the sales revenue account for on total receivables? these adjustments? 8. Why is it important to monitor operating ratios 4. Why do most companies tolerate having a such as accounts receivable turnover? small percentage of uncollectible accounts receivable