The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?:
A) debit Allowance for Doubtful Accounts; credit Accounts Receivable
B) debit Sales Returns and Allowance, credit Accounts Receivable
C) debit Bad Debt Expense; credit Allowance for Doubtful Accounts
D) debit Bad Debt Expense; credit Accounts Receivable

Question

Quizplus · Accepted Answer

The direct write-off method of accounting for uncollectible accounts receivable requires that the bad debt expense be debited and the accounts receivable be credited, as it directly writes off the uncollectible amount. Option A is incorrect as it involves the use of an allowance account, which is not used in the direct write-off method. Option B is incorrect as it involves sales returns and allowances, which are not related to the uncollectibility of accounts receivable. Option C is incorrect as it involves the use of the allowance account, which, as mentioned before, is not used in the direct write-off method.