Assume that the Lindley Corporation uses the direct write-off method of accounting for uncollectible accounts. Which of the following answers correctly describes the effect of the write-off of the customer's account on Lindley's financial statements?
A)Option A
B)Option B
C)Option C
D)Option D

Question

Assume that the Lindley Corporation uses the direct write-off method of accounting for uncollectible accounts. Which of the following answers correctly describes the effect of the write-off of the customer's account on Lindley's financial statements? 
A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

If Lindley uses the direct write-off method, the write-off will decrease assets (accounts receivable) and increase expenses (uncollectible accounts expense), which decreases net income and equity. It does not affect the statement of cash flows.

Assume That the Lindley Corporation Uses the Direct Write-Off Method