When making a collection,no entry was recorded to reinstate an account previously written off.The allowance method is being used.This error would cause:
A)total assets to be overstated.
B)total liabilities to be understated.
C)net income to be understated.
D)None of these is correct.

Question

Quizplus · Accepted Answer

When using the allowance method, writing off an account does not affect net income or total assets because the allowance for doubtful accounts already anticipates such losses. Reinstating the account and recording the collection should not affect the financial statements, so none of the options are correct.

When Making a Collection,no Entry Was Recorded to Reinstate an Account