How are net income and the accounts receivable turnover ratio affected when a customer account balance,which is known to be uncollectible,is written off? Assuming the company is using allowance method.
A)Net income and accounts receivable turnover ratio decrease
B)Net income decreases; no change in accounts receivable turnover ratio
C)No change in net income; accounts receivable turnover ratio decreases
D)No change in net income or accounts receivable turnover ratio

Question

Quizplus · Accepted Answer

Under the allowance method, the expense related to uncollectible accounts is recognized before the specific account is written off. Therefore, writing off an account does not affect net income or the accounts receivable turnover ratio, as the allowance for doubtful accounts already accounted for the expected loss.

How Are Net Income and the Accounts Receivable Turnover Ratio