The net effect of the entries to recognize the collection of a previously written-off account under the allowance method will
A) increase total assets and total equity.
B) increase total equity only.
C) decrease total assets.
D) have no effect on total assets or total equity.

Question

Quizplus · Accepted Answer

Under the allowance method, when a previously written-off account is collected, it involves reversing the write-off entry and recording the cash collection. This process affects only the accounts receivable and allowance for doubtful accounts, both of which are asset accounts, thus having no net effect on total assets or total equity.

The Net Effect of the Entries to Recognize the Collection