To record estimated uncollectible accounts using the allowance method the adjustment would be a(n)
A)increase to Accounts Receivable and an increase to Allowance for Doubtful Accounts.
B)increase to Bad Debt Expense and an increase to Allowance for Doubtful Accounts.
C)decrease to Allowance for Doubtful Accounts and a decrease to Accounts Receivable.
D)increase to Loss on Credit Sales and a decrease to Accounts Receivable.

Question

Quizplus · Accepted Answer

The allowance method involves estimating the amount of uncollectible accounts receivable and creating an allowance for doubtful accounts to reflect this estimate. To record this adjustment, Bad Debt Expense (an expense account) is increased, and Allowance for Doubtful Accounts (a contra-asset account) is also increased. This reflects the increase in estimated uncollectible accounts and reduces the net realizable value of accounts receivable. Therefore, option B is the correct answer.

To Record Estimated Uncollectible Accounts Using the Allowance Method the Adjustment