When using the allowance method
A)the write-off of specific customers' accounts does not affect income.
B)the income effect occurs in the year of sale, when the firm provides for estimated uncollectible accounts.
C)the write-off of specific customers' accounts does not affect (net) accounts receivable.
D)all of the above.
E)none of the above.

Question

Quizplus · Accepted Answer

The allowance method involves estimating uncollectible accounts receivable and making an adjustment to the allowance for doubtful accounts. The write-off of specific customers' accounts does not affect income because the allowance was already established for that purpose. Also, the income effect occurs in the year of sale when the firm provides for estimated uncollectible accounts. Finally, the write-off of specific customers' accounts does not affect (net) accounts receivable because the allowance was already adjusted for those accounts. Therefore, all of the above are correct.

When Using the Allowance Method