A company uses the direct write-off method to account for bad debts. What are the effects on the accounting equation of the entry to record the write-off of a customer's account balance?

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When a company writes off a bad debt under the direct write-off method, it decreases assets (accounts receivable) and decreases stockholders' equity (through a reduction in net income, as the expense is recognized). Liabilities are not affected by this entry.

A Company Uses the Direct Write-Off Method to Account for Bad