Solution-Which is more theoretically correct

1. What are two methods of recording accounts receivable transactions when a cash discount situation is involved?

2. Which is more theoretically correct?

3. Which is used in practice more of the time? Why?

What the theoretical justification of the allowance method : What the theoretical justification of the allowance method is as contrasted with the direct write-off method of accounting for bad debts?

Why do we exclude interest expense and taxes from operating : Why do we exclude interest expense and taxes from operating cash flow?

Why is depreciation considered a noncash charge : Why is depreciation (as well as amortization and depletion) considered a noncash charge?

What are the basic problems that occur in the valuation : What are the basic problems that occur in the valuation of accounts receivable?

Which is more theoretically correct : What are two methods of recording accounts receivable transactions when a cash discount situation is involved?

What are the reasons that a company gives trade discounts : What are the reasons that a company gives trade discounts? Why are trade discounts not recorded in the accounts like cash discounts?

What section of the balance sheet would report this item : What section of the balance sheet would report this item?

How should a compensating balance be reported : Define a "compensating balance." How should a compensating balance be reported?

What may be included under the heading of cash : What may be included under the heading of "cash"?