Under the allowance method of accounting for bad debts, the recognition of bad debts expense
A) increases current assets and decreases net income.
B) decreases current assets and increases net income.
C) increases current assets and net income.
D) decreases current assets and net income.

Question

Quizplus · Accepted Answer

The allowance method decreases current assets by increasing the allowance for doubtful accounts (a contra-asset account) and decreases net income by recognizing bad debts expense.

Under the Allowance Method of Accounting for Bad Debts, the Recognition