If the allowance method is used,how does recording the recovery of an uncollectible account affect the elements of the financial statements? (Hint: Consider the effect of both the reinstatement and the collection of the receivable taken together.)

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When a company receives payment on a previously written-off account, it must first reinstate the written-off account. The reinstatement increases assets (accounts receivable) and decreases assets (by increasing the allowance for doubtful accounts, a contra asset account), with no net effect on any of the elements of the financial statements. Then, the company records collection of the receivable, which increases assets (cash) and decreases assets (accounts receivable), again with no net effect on total assets, total liabilities, or stockholders' equity. The event is reported as a cash inflow for operating activities on the statement of cash flows.

If the Allowance Method Is Used,how Does Recording the Recovery