A company with significant amounts of accounts receivable, experiences uncollectible accounts from time to time. If the company uses the direct write-off method, the effect of writing off of an uncollectible receivable will be a(n):

Question

Quizplus · Accepted Answer

The direct write-off method records the bad debt expense and reduces the accounts receivable balance when an account is deemed uncollectible. This results in a direct reduction to net income, which is why choice A is the correct answer. Choices B, C, and D are not accurate because writing off an uncollectible receivable does not have any impact on total assets or cash flow.

A Company with Significant Amounts of Accounts Receivable, Experiences Uncollectible