When the allowance method is used for bad debts, the entry to write off an individual account known to be uncollectible involves a:
A) debit to an expense account.
B) credit to an expense account.
C) credit to the Allowance account.
D) debit to the Allowance account.

Question

Quizplus · Accepted Answer

When an individual account is known to be uncollectible and the allowance method is used for bad debts, the entry to write it off involves debiting the Allowance account and crediting the Accounts Receivable account. This is because the company has already set aside funds in the Allowance account to cover such uncollectible accounts, so the entry to write off the account reduces the balance in both Accounts Receivable and Allowance accounts.

When the Allowance Method Is Used for Bad Debts, the Entry