SRM Company uses the allowance method to record its bad debt expense. When the account of a particular customer is deemed to be uncollectible and is written off, which of the following will be included in the journal entry?
A) Debit to bad debt expense.
B) Credit to bad debt expense.
C) Debit to allowance for doubtful accounts.
D) Debit to trade receivables.

Question

Quizplus · Accepted Answer

When an account is deemed uncollectible and written off under the allowance method, the journal entry includes a debit to the allowance for doubtful accounts, reducing the allowance balance, and a credit to trade receivables, reducing the amount of receivables outstanding. This entry does not affect the bad debt expense at the time of write-off.

SRM Company Uses the Allowance Method to Record Its Bad