When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include:
A) A credit to Bad Debt Expense
B) A debit to Bad Debt Expense
C) A debit to Allowance for Doubtful Accounts
D) A credit to Allowance for Doubtful Accounts

Question

Quizplus · Accepted Answer

The allowance method involves estimating the amount of uncollectible accounts and creating a contra-asset account called Allowance for Doubtful Accounts. When a customer's account is written off as uncollectible, the entry includes a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. To reinstate a previously written off account, the entry would reverse the previous write-off by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts. Therefore, the correct answer is D - a credit to Allowance for Doubtful Accounts.

When a Company Uses the Allowance Method of Accounting for Uncollectible