Under the allowance method of accounting for uncollectible accounts
A)the cash realizable value of accounts receivable is greater before an account is written off than after it is written off.
B)Bad Debt Expense is increased when a specific account is written off as uncollectible.
C)the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
D)Allowance for Doubtful Accounts is closed each year to Income Summary.

Question

Quizplus · Accepted Answer

Under the allowance method, the cash realizable value of accounts receivable (which is the balance sheet value) is reduced by the estimated uncollectible amount, which is already reflected in the allowance for doubtful accounts. Writing off a specific account only affects the allowance account and has no impact on the cash realizable value. Therefore, the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.

Under the Allowance Method of Accounting for Uncollectible Accounts