When an account receivable is written off under the direct write-off method, the accounting equation is kept in balance because
A) assets and equity both decrease by the same amount.
B) assets both increase and decrease by the same amount.
C) assets and equity both increase by the same amount.
D) equity both increases and decreases by the same amount.

Question

Quizplus · Accepted Answer

When an account receivable is written off under the direct write-off method, the asset "Accounts Receivable" decreases and the equity account "Allowance for Doubtful Accounts" increases. Both of these accounts are contra accounts to each other, so they offset each other, keeping the accounting equation in balance. Therefore, assets and equity both decrease by the same amount.

When an Account Receivable Is Written Off Under the Direct