Cambridge Co.uses the allowance method.During January 2019,Cambridge writes off a $640 customer account balance when it becomes clear that the customer will never pay.The entry to record the write-off will:
A)decrease total assets by $640.
B)decrease net income in 2019 by $640.
C)decrease net accounts receivable by $640.
D)not affect expenses in 2019.

Question

Quizplus · Accepted Answer

When the allowance method is used and a customer account is written off,a decrease is recorded in Accounts Receivable,which is offset by a decrease in the contra-account,Allowance for Doubtful Accounts.The decrease in Accounts Receivable decreases total assets,while the decrease in the Allowance for Doubtful Accounts increases total assets.As a result,total assets do not change.A write-off does not affect liabilities,revenues,or expenses.