The entry required to recognize the uncollectible accounts expense for 2012 will
A) increase total assets and retained earnings.
B) decrease total assets and retained earnings.
C) decrease total assets and increase net income.
D) increase total assets and decrease net income.

Question

Quizplus · Accepted Answer

Recognizing the uncollectible accounts expense for 2012 will result in a decrease in total assets (specifically accounts receivable) and retained earnings. This is because the expense reduces the amount of expected future cash inflows from customers, which in turn reduces the value of accounts receivable as an asset. The decrease in net income will occur because the expense is subtracted from revenues to arrive at net income.

The Entry Required to Recognize the Uncollectible Accounts Expense for 2012