No entry was recorded to reinstate a bad debt when making a collection.The allowance method is being used.This error would cause:

Question

Quizplus · Accepted Answer

When using the allowance method, not recording the reinstatement of a bad debt when making a collection would not affect total assets, total liabilities, or net income directly. The collection would still increase cash and decrease the allowance for doubtful accounts, leaving the net effect on financial statements neutral in terms of the error described.

No Entry Was Recorded to Reinstate a Bad Debt When