The year-end adjusting entry to record bad debt expense will increase which of the following ratios?
A)Current.
B)Earnings quality.
C)Quick.
D)Net profit margin.

Question

Quizplus · Accepted Answer

The year-end adjusting entry to record bad debt expense will increase the allowance for bad debts account, which is a contra-asset account. This will decrease the net accounts receivable balance, which will in turn decrease the current ratio. However, the bad debt expense will also increase the net income, which will increase the earnings quality ratio.

The Year-End Adjusting Entry to Record Bad Debt Expense Will