Question
Tax-Manian Devils, PC, a tax preparation service in Schenectady, New York, has very stringent credit requirements for services provided on account. Accordingly, the company's losses
Tax-Manian Devils, PC, a tax preparation service in Schenectady, New York, has very stringent credit requirements for services provided on account. Accordingly, the company's losses from uncollectible accounts are negligible. Danielle Miller, an independent accountant working with Tax-Manian Devils, PC, did not protest when, contrary to GAAP, the company recorded bad debts expense only when specific accounts were determined to be uncollectible. Pursuant to GAAP, the company could have used an allowance for uncollectable accounts.
This concept demonstrates:
(a) materiality;
(b) faithful representation;
(c) comparability;
(d) cost-effectiveness; or
(e) going concern assumption.
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