When an account is written off using the allowance method for uncollectible accounts, accounts receivable
A)is unchanged and the allowance account increases.
B)increases and the allowance account increases.
C)decreases and the allowance account decreases.
D)decreases and the allowance account increases.

Question

Quizplus · Accepted Answer

When an account is written off using the allowance method, the accounts receivable balance decreases because the specific receivable is no longer expected to be collected. Simultaneously, the allowance for doubtful accounts, which is a contra-asset account to accounts receivable, also decreases. This is because the allowance account had previously been increased to anticipate such losses, and the write-off actualizes one of these anticipated losses, reducing the need for as large an allowance.

When an Account Is Written Off Using the Allowance Method