At the end of the accounting period,The Grass is Greener Corporation learns that a customer who owes $350 has gone bankrupt and payment will not be made.The Grass is Greener Corporation should:

Question

Quizplus · Accepted Answer

The best choice is to debit the Allowance for Doubtful Accounts and credit Accounts Receivable for $350. This is because the customer has already been recognized as a potential bad debt through the allowance account, so the accounts have already been adjusted for this possibility. When it is confirmed that the customer will not be paying, the allowance account is specifically used to write off the bad debt instead of reducing the original accounts receivable directly. This maintains the accuracy of the accounts and makes it easier to identify bad debt expenses in the future.

At the End of the Accounting Period,The Grass Is Greener