Green Company wrote off a client's account receivable of $400 as uncollectible. What will be the effect on net income under the following methods of recognizing bad debt expense?
$\begin{array}{cc} &\text { Direct Write-off }&\text { Allowance} \\end{array}$

Question

Green Company wrote off a client's account receivable of $400 as uncollectible. What will be the effect on net income under the following methods of recognizing bad debt expense? 
$\begin{array}{cc} &\text { Direct Write-off }&\text { Allowance} \\end{array}$

Quizplus · Accepted Answer

Under the direct write-off method, writing off an account receivable directly decreases net income because it increases bad debt expense. Under the allowance method, the effect on net income occurs when the allowance is estimated and recorded, not when specific accounts are written off, so there is no immediate effect on net income when an account is written off.

Green Company Wrote Off a Client's Account Receivable of $400 Direct Write-off Allowance\begin{array}{cc} &\text { Direct Write-off }&\text { Allowance} \\\end{array}​ Direct Write-off ​ Allowance​

Green Company Wrote Off a Client's Account Receivable of $400 $\begin{array}{cc} &\text { Direct Write-off }&\text { Allowance} \\\end{array}$