If a company uses the allowance method to account for bad debts,when will the company's owners' equity decrease?
A)At the date a customer's account is written off
B)At the end of the accounting period when an adjustment for bad debts is recorded
C)At the date a customer's account is determined to be uncollectible
D)When the accounts receivable amount becomes past due

Question

Quizplus · Accepted Answer

The owners' equity will decrease at the end of the accounting period when an adjustment for bad debts is recorded. This is because the allowance for doubtful accounts is adjusted based on an estimate of the amount of bad debts that are expected, and this adjustment directly impacts the owners' equity.

If a Company Uses the Allowance Method to Account for Bad