The balance in Allowance for Doubtful Accounts will directly impact the end-of-period adjustment for the bad debt expense when using which of the following methods?
A) allowance method based on aging the receivables
B) direct write-off method
C) accrual method
D) declining value method

Question

The balance in Allowance for Doubtful Accounts will directly impact the end-of-period adjustment for the bad debt expense when using which of the following methods? ​
A) allowance method based on aging the receivables
B) direct write-off method
C) accrual method
D) declining value method

Quizplus · Accepted Answer

The allowance method based on aging the receivables requires the use of the Allowance for Doubtful Accounts account. The balance in this account is used to estimate the amount of bad debts that are expected to occur but have not yet been identified. The end-of-period adjustment for the bad debt expense is calculated by subtracting the balance in the Allowance for Doubtful Accounts account from the total accounts receivable balance. Thus, the balance in the Allowance for Doubtful Accounts account directly impacts the end-of-period adjustment for the bad debt expense. The other methods listed do not use the Allowance for Doubtful Accounts account in the same way, so the balance in that account does not impact the end-of-period adjustment for the bad debt expense in those methods.

The Balance in Allowance for Doubtful Accounts Will Directly Impact