After the firm estimates the amount of uncollectible accounts associated with the credit sales of each period, it makes an adjusting entry to debit _____ and credit _____.
A)Bad Debt Expense; Accounts Receivable, Net
B)Bad Debt Expense; Accounts Receivable, Gross
C)Allowance for Uncollectibles; Bad Debt Expense
D)Bad Debt Expense; Allowance for Uncollectibles
E)Allowance for Uncollectibles; Accounts Receivable, Gross

Question

Quizplus · Accepted Answer

The adjusting entry for estimating uncollectible accounts involves debiting Bad Debt Expense and crediting Allowance for Uncollectibles. This is because the expense needs to be recognized in the period in which the sale was made, and the allowance needs to be increased to reflect the expected amount of uncollectible accounts. Option A and E are incorrect as they do not involve increasing the allowance account. Option B is incorrect as it involves the gross amount which includes both collectible and uncollectible amounts, and it would not accurately reflect the net realizable value of accounts receivable. Option C is also incorrect as it involves debiting the allowance account, which is opposite to the usual practice.

After the Firm Estimates the Amount of Uncollectible Accounts Associated