Cottage Sales Company made most of its sales on credit during its first year of operation,2013.At the end of the year,accounts receivable amounted to $100,000.On December 31,2013,management reviewed the collectible status of the accounts receivable.Approximately $6,000 of the $100,000 of accounts receivable were estimated to be uncollectible.As per the accounts receivable aging method the adjusting entry that would be made on December 31 of that year is:

Question

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The adjusting entry that would be made on December 31 of that year is:
Uncollectible Accounts Expense 6,000
Allowance for Uncollectible Accounts 6,000
This is because the accounting principle of conservatism requires companies to estimate and record any uncollectible accounts in the same period in which the sale was made, even if the amount is uncertain. The allowance for uncollectible accounts is a contra asset account that is used to reduce the amount of accounts receivable to their net realizable value, or the amount that is expected to be collected. The adjusting entry records the estimated uncollectible accounts as an expense and reduces the allowance for uncollectible accounts by the same amount, resulting in a more accurate valuation of accounts receivable. Therefore, choice C is the best answer.

Cottage Sales Company Made Most of Its Sales on Credit