When using the allowance method,what are the effects on the accounting equation when a company writes off a bad debt?
A)Assets and stockholders' equity increase.
B)Assets and stockholders' equity decrease.
C)Assets increase and stockholders' equity decreases.
D)There is no effect on overall assets or equity.

Question

Quizplus · Accepted Answer

When a company writes off a bad debt under the allowance method, it reduces accounts receivable and the allowance for doubtful accounts by the same amount. This action does not affect the total assets or the stockholders' equity because it's essentially moving amounts within the assets category, from one asset account to another.

When Using the Allowance Method,what Are the Effects on the Accounting