Under the allowance method for uncollectible accounts,
A)bad debts expense is not recorded until a customer defaults.
B)the entry to write off an uncollectible account only involves statement of financial position accounts.
C)allowance for doubtful accounts increases, while accounts receivables decrease when writing off an uncollectible account.
D)bad debt expense increases, while allowance for doubtful accounts decreases when writing off an uncollectible account.

Question

Quizplus · Accepted Answer

The allowance method involves estimating uncollectible accounts at the end of each period and recording those estimates as bad debt expense. When an actual account is deemed uncollectible and written off, the entry affects only the balance sheet accounts: it decreases both the Allowance for Doubtful Accounts and Accounts Receivable, with no impact on the income statement at the time of the write-off.

Under the Allowance Method for Uncollectible Accounts