Question

Cambridge Co. uses the allowance method. During January 2019, Cambridge writes off a $640 customer account balance when it becomes clear that the customer will never pay. The entry to record the write-off will:
A. not affect expenses in 2019.
B. decrease total assets by $640.
C. decrease net income in 2019 by $640.
D. decrease net accounts receivable by $640.

Answer 1

Answer:

A. not affect expenses in 2019.

Explanation:

Using the allowance method, when the amount is written off , the account receivable account is credited whereas the allowance for doubtful debts is debited

Moreover, it does not affect the income statement as there is no expenses incurred or no revenue earned is recorded

So, in this case, there is no affect on expenses account