The adjustment to account for future bad debts has the effect of (1)reducing assets and (2)increasing liabilities.The adjustment has the effect of (1)reducing assets and (2)increasing expenses.An increase in expenses reduces net income and retained earnings.

Question

Quizplus · Accepted Answer

The adjustment for future bad debts reduces assets and increases expenses, not liabilities. This increase in expenses reduces net income and retained earnings.

The Adjustment to Account for Future Bad Debts Has the Effect