Under the income-statement approach (percent-of-sales approach), the entry to accrue bad-debt expense involves:
A)a debit to allowance for doubtful accounts and a credit to bad-debt expense.
B)a debit to bad-debt expense and a credit to allowance for doubtful accounts.
C)a debit to bad-debt expense and a credit to accounts receivable.
D)a debit to allowance for doubtful accounts and a credit to accounts receivable.

Question

Quizplus · Accepted Answer

Under the income-statement approach, bad-debt expense is estimated as a percentage of sales and recorded by debiting bad-debt expense and crediting allowance for doubtful accounts. This approach focuses on the income statement and the expected uncollectibility of the current period's sales.

Under the Income-Statement Approach (Percent-Of-Sales Approach), the Entry to Accrue