Question

The adjusting entry to record the allowance for doubtful accounts causes total ______. (Check all that apply.) Multiple select question. stockholders' equity to decrease assets to decrease assets to increase liabilities to increase liabilities to decrease stockholders' equity to increase

Answer 1

Assets to decreases and stockholders' equity to decrease due to the adjusting entry used to record the allowance for doubtful accounts.

Allowance for doubtful accounts also known as contra account nets against the total receivables shown on the balance sheet to only show the amounts anticipated to be paid. The percentage of accounts receivable that are anticipated to be uncollectible is estimated by the allowance for doubtful accounts.

The danger of not being paid is always inherent in a credit-based transaction, regardless of the corporate rules and procedures for credit collections. As a result, a business must recognize this risk by creating an allowance for doubtful accounts and offsetting bad debt expenditure.

Learn more about Doubtful accounts here

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