What happens if a company uses the allowance method of accounting - ProProfs Discuss
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What happens if a company uses the allowance method of accounting for noncollectable accounts and writes off a specific account?



A. The effect on net account receivables depends on the relationship between the allowance account balance and the amount of the write off.
B. Net accounts receivable decrease
C. Net accounts receivable do not change.
D. Net accounts receivable increase.

This question is part of Financial Accounting Exam II, Chapters 5 & 6
Asked by Stephens, Last updated: Feb 25, 2020

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2 Answers

f.Brian

F.Brian

Answered Jan 29, 2018

In the event that a company would use the allowance method of accounting for uncollectible accounts and writes off a specific account net accounts receivable would not change. To clarify a few terms the allowance method is a process that is used to adjust accounts receivable appearing on the balance sheet.

Net accounts receivable refers to the combined amount of the debit balance in the current asset account receivable and the credit balance in the asset account that allows for doubtful accounts. The allowance method is commonly used in accounting.

 

John Smith

John Smith

Answered Oct 26, 2016

Net accounts receivable do not change.
 

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