Question

A company uses the allowance method to account for uncollectible accounts receivables. When the firm writes off a specific customer’s account receivable A. total current assets are reducedB. total expenses for the period are increasedC. net realizable value of accounts receivable increasesD. there is no effect on total current assets or total expenses

Answer 1

Answer:

A) Total current assets are reduced

Explanation:

The account receivables are included in the Current Assets side and when the company writes off the debt of a client it reduce the value of the assets in the balance sheets to reflect that the amount to be collected it's less that the current amount.  

This reduction in the Current Assets have an impact in the Losses of the company in the Income Statement and it must be reflected.