To record estimated uncollectible receivables using the allowance method,the adjusting entry would be a
A)debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts
B)debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts
C)debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable
D)debit to Loss on Credit Sales and a credit to Accounts Receivable

Question

Quizplus · Accepted Answer

The allowance method requires the use of an allowance account to estimate uncollectible receivables. The adjusting entry to record this estimate would be a debit to Bad Debts Expense (an expense account) and a credit to Allowance for Doubtful Accounts (a contra-asset account). This entry recognizes the expense associated with the estimate of uncollectible receivables and reduces the carrying value of accounts receivable on the balance sheet. Option B is incorrect because it would increase the carrying amount of accounts receivable, which is not the purpose of the allowance method. Option C is incorrect because it is the exact opposite of the correct entry. Option D is incorrect because it is not a valid accounting entry when using the allowance method.

To Record Estimated Uncollectible Receivables Using the Allowance Method,the Adjusting