Assuming a company uses the allowance method, the entry to recognize the write-off of the specific uncollectible accounts will act to:
A) Increase total assets and total equity
B) Increase total assets and decrease total equity
C) Decrease total assets and total equity
D) Not affect total assets or total equity

Question

Quizplus · Accepted Answer

When a company writes off a specific uncollectible account under the allowance method, it reduces Accounts Receivable and the Allowance for Doubtful Accounts by the same amount. This action does not affect total assets or total equity because it's merely shifting amounts within assets (reducing both Accounts Receivable and the allowance) without affecting the overall financial position or equity.

Assuming a Company Uses the Allowance Method, the Entry to Recognize