Under the allowance method for uncollectible accounts, when a year-end adjustment is made for estimated uncollectible accounts,
A)total assets decrease.
B)total assets are unchanged.
C)net profit is unchanged.
D)liabilities decrease.

Question

Quizplus · Accepted Answer

The allowance method for uncollectible accounts involves creating an estimated allowance for uncollectible accounts, which is deducted from accounts receivable to show a more accurate representation of the amount of receivables that are expected to be collected. When a year-end adjustment is made for estimated uncollectible accounts, total assets decrease because the estimated allowance for uncollectible accounts is deducted from accounts receivable, which is an asset account. Therefore, choice A is the correct answer. Total assets decrease, net profit may or may not be affected depending on the amount of the adjustment, and liabilities do not change.

Under the Allowance Method for Uncollectible Accounts, When a Year-End