When writing off a specific customer account using the allowance method:
A) Allowance for Doubtful Accounts decreases and Bad Debts Expense increases.
B) Bad Debts Expense increases and Accounts Receivable decreases.
C) Accounts Receivable increases and Allowance for Doubtful Accounts increases.
D) Allowance for Doubtful Accounts decreases and Accounts Receivable decreases.

Question

Quizplus · Accepted Answer

When writing off a specific customer account using the allowance method, the Allowance for Doubtful Accounts decreases because the anticipated loss becomes an actual loss, and Accounts Receivable decreases because the specific customer's balance is removed from the accounts receivable balance. This entry does not affect the Bad Debts Expense because the expense was recognized earlier when the allowance was created.

When Writing Off a Specific Customer Account Using the Allowance