To record estimated uncollectible accounts using the allowance method for uncollectible accounts, the adjusting entry would be a debit to?
A) Loss on Credit Sales and a credit to Trade Accounts Receivable.
B) Trade Accounts Receivable and a credit to Allowance for Doubtful Accounts.
C) Allowance for Doubtful Accounts and a credit to Trade Accounts Receivable.
D) Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Question

Quizplus · Accepted Answer

The allowance method for uncollectible accounts requires estimating the amount of accounts receivable that are likely to be uncollectible and recording that amount as Bad Debts Expense, which is a debit to the expense account. The credit entry is made to the Allowance for Doubtful Accounts, which is a contra-asset account used to reduce the balance of the related asset account (Trade Accounts Receivable) on the balance sheet. Therefore, the correct entry is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

To Record Estimated Uncollectible Accounts Using the Allowance Method for Uncollectible