Question

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibleA. will increase net income in the period it is collected.B. will decrease net income in the period it is collected.C. does not affect net income in the period it is collected.D. requires a correcting entry for the period in which the account was written off

Answer 1

Answer:

C. does not affect net income in the period it is collected

Explanation:

The whole point of the allowance method is to do not impact the net income when performing a write-off

When a write-off occurs the following entry is made:

allowance for doubful accounts  debit

               account receivable                credit

If the account is reversed:

account receivable         debit

   allowance for doubful account     credit

cash                    debit

   account receivable      credit

There is no revenue or expense account used in the procedure. Therefore, it does not affect net income.