When an account is written off under the allowance method,
A)the write-off is taken against the allowance account.
B)bad debt expense is increased.
C)accounts receivable remains unchanged.
D)accounts receivable increases.

Question

Quizplus · Accepted Answer

When an account is written off under the allowance method, it means that the company has determined that there is no likelihood of collecting the debt, and therefore removes the amount from their accounts receivable. This write-off is taken against the previously established allowance account, which represents an estimate of the company's total expected bad debt losses. The accounts receivable balance and bad debt expense remain unchanged as a result of the write-off.

When an Account Is Written Off Under the Allowance Method