To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a debit to:
A) Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B) Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
C) Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D) Loss on Credit Sales and a credit to Accounts Receivable.

Question

Quizplus · Accepted Answer

The allowance method requires companies to estimate the uncollectible accounts receivable and create an allowance for that amount. The adjusting entry to record estimated uncollectible accounts using the allowance method would be a debit to Bad Debt Expense (an expense account) and a credit to Allowance for Doubtful Accounts (a contra-asset account). This entry reflects the expense associated with estimated uncollectible accounts and reduces the carrying value of accounts receivable on the balance sheet. Option A is incorrect because it increases accounts receivable, whereas the entry should decrease it. Option C is incorrect because it credits accounts receivable, whereas the allowance account should be credited. Option D is incorrect because it suggests a loss on credit sales, which is not the case when adjusting for uncollectible accounts.

To Record Estimated Uncollectible Accounts Using the Allowance Method, the Adjusting