Assuming the allowance method, the entry to record the write-off of a specific, non-paying customer is recorded with a debit to ______.Multiple choice question.Allowance for Doubtful Accounts and credit to Accounts ReceivableAccounts Receivable and credit to Allowance for Doubtful Accounts.Bad Debts Expense and credit to Accounts ReceivableAccounts Receivable and credit to Bad Debts Expense
Question
Assuming the allowance method, the entry to record the write-off of a specific, non-paying customer is recorded with a debit to ______.Multiple choice question.Allowance for Doubtful Accounts and credit to Accounts ReceivableAccounts Receivable and credit to Allowance for Doubtful Accounts.Bad Debts Expense and credit to Accounts ReceivableAccounts Receivable and credit to Bad Debts Expense
Solution
The correct answer is "Allowance for Doubtful Accounts and credit to Accounts Receivable".
Here's the step by step explanation:
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When a specific customer's account is identified as uncollectible, the company needs to write off the account.
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The write-off is recorded by reducing (debiting) the Allowance for Doubtful Accounts. This is because the allowance account is a contra asset account that's used to anticipate future bad debts. When a bad debt becomes certain (as in this case), it's removed from the allowance account.
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The other side of the entry is a reduction (credit) to Accounts Receivable, which reflects that the company no longer expects to receive payment from the specific customer.
So, the journal entry would be:
Debit: Allowance for Doubtful Accounts Credit: Accounts Receivable
Similar Questions
Which of the following is recorded at the end of an accounting period when accounting for receivables using the allowance method?Multiple choice question.The write off of specific customer accounts is recorded by debiting Allowance for Doubtful Accounts and crediting Bad Debt Expense.An estimate is recorded by debiting Bad Debt Expense and crediting Allowance for Doubtful Account in the same period as the related sale.The write off of specific customer accounts is recorded by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts.The write off of specific customer accounts is recorded by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable.
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f the Allowance for Doubtful Accounts has a $1,000 debit balance prior to making the end-of-period adjusting entry for bad debts, then it must mean that ______.Multiple choice question.the direct write-off method was usedthe aging method was used$1,000 fewer accounts receivables were written off than were estimated back when the prior period's adjusting entry for bad debts was recordedthe sales method was used$1,000 more accounts receivables were written off than were estimated back when the prior period's adjusting entry for bad debts was recorded
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