Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The balance of Allowance for Doubtful Accounts immediately after the write-off is
A)$1,300 credit.
B)$700 credit.
C)$300 debit.
D)$700 debit.

Question

Quizplus · Accepted Answer

When a $300 account receivable is written off, it means that it is no longer considered as part of the accounts receivable balance. Thus, the balance of the accounts receivable decreases by $300.

To record this write-off, we need to decrease the balance of the Allowance for Doubtful Accounts by $300 as well. This is because the account that was written off was previously accounted for in the allowance balance.

Therefore, the new balance of the Allowance for Doubtful Account is:

$1,000 (previous balance) - $300 (write-off) = $700 credit.

Hence, the best answer is B.

Allowance for Doubtful Accounts Has a Credit Balance of $1,000