Under the direct write-off method of uncollectible accounts, the effect on the accounting equation of writing off a customer's account is
A) an increase in assets and an increase in liabilities
B) an increase in liabilities and a decrease in stockholders' equity (expense)
C) a decrease in assets and a decrease in liabilities
D) a decrease in assets and a decrease in stockholders' equity (expense)

Question

Quizplus · Accepted Answer

Writing off a customer's account under the direct write-off method involves recognizing the uncollectible amount as an expense, which reduces stockholders' equity (expense). At the same time, the company reduces the accounts receivable asset, which decreases assets. This results in a decrease in assets and a decrease in stockholders' equity (expense).

Under the Direct Write-Off Method of Uncollectible Accounts, the Effect