Which of the following statements is true about the allowance method for uncollectible accounts?
A) The net realizable value of trade accounts receivable is greater before an account is written off than after it is written off.
B) Bad Debts Expense is debited when a speciﬁc account is written off as uncollectible.
C) The net realizable value of trade accounts receivable on the balance sheet is the same before and after an account is written off.
D) Allowance for Doubtful Accounts is closed each year to Income Summary.

Question

Quizplus · Accepted Answer

The allowance method for uncollectible accounts involves estimating the amount of bad debt expense to be recognized in the period the revenue is earned, rather than when the specific account is deemed uncollectible. When an account is written off, it reduces both the Accounts Receivable and the Allowance for Doubtful Accounts by the same amount, leaving the net realizable value of trade accounts receivable unchanged.

Which of the Following Statements Is True About the Allowance