Using the direct write-off method, the effect on the accounting equation of writing off a debtor's account as a bad debt is:
A) decrease in the asset bank, decrease in the asset debtors.
B) no effect.
C) decrease in the asset debtors, increase in the liability provision for doubtful debts.
D) decrease in the asset debtors, decrease in equity.

Question

Quizplus · Accepted Answer

The direct write-off method involves directly reducing the debtor's balance (an asset) and recognizing the expense by reducing equity (through the income statement), without affecting the bank or creating a liability for doubtful debts.

Using the Direct Write-Off Method, the Effect on the Accounting