Why do companies use the allowance method to account for bad debts? Describe the diverse methods used to estimate bad debts in an accounting system.

Assignment

Question(s): (Marks15)

Q1. Suppose you are an auditor who has been tasked with looking into the internal controls at a company. How can you evaluate the company’s internal controls to see if they are sufficient?                                                                                  (5Marks)

Q2. Why do companies use the allowance method to account for bad debts? Describe the diverse methods used to estimate bad debts in an accounting system. Provide examples for each method.                                                              (5Marks)

Q3. Consider that you own a business that purchases equipment for 50,000SR. How would you calculate this asset’s depreciation? Use the different methods to depreciate the equipment.

Note: To calculate depreciation, you must provide the salvage value, useful life, and annual units produced.                           (5Marks)