A municipality uses the allowance method to record uncollectible property taxes.If it decides to write off an account as uncollectible,it should:
A)debit bad debts expenditures;credit allowance for uncollectible property taxes
B)debit allowance for uncollectible property taxes;credit property taxes receivable
C)debit allowance for uncollectible property taxes;credit property tax revenues
D)debit property tax revenues;credit property taxes receivable

Question

Quizplus · Accepted Answer

When the municipality decides to write off an account as uncollectible, it needs to reduce its Property Tax Receivable account by crediting it. At the same time, it needs to recognize the loss by debiting an allowance account, such as the Allowance for Uncollectible Property Taxes. The allowance account's purpose is to estimate and match the bad debt expense with the period's revenue, adhering to the matching principle of accounting. Therefore, the correct entry is to debit the allowance for uncollectible property taxes and credit property taxes receivable.

A Municipality Uses the Allowance Method to Record Uncollectible Property