Archer Company has significant amounts of accounts receivable, and experiences bad debts from time to time. Archer uses the percentage- of- sales method to account for bad debts. When Archer Company writes off an uncollectable receivable, what is the effect of that single transaction?

Question

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When a company writes off an uncollectable receivable, it reduces both accounts receivable and the allowance for doubtful accounts, which are both balance sheet accounts. This transaction does not affect profit as the expense was already recognized when the allowance was created.

Archer Company Has Significant Amounts of Accounts Receivable, and Experiences