Question

Uptown, Inc. has determined that an account receivable of $125 is uncollectible. The company uses the direct write-off method. Which of the following entries is required to record the write-off?
A. Allowance for Bad Debts 125 125
Account Receivable
B. Accounts Receivable 125 125
Bad Debts Expense
C. Bad Debts Expense 125 125
Accounts Receivable
D. Cash 125 125
Accounts Receivable

Answer 1

Answer:

C. Bad Debts Expense 125 125

Accounts Receivable

Explanation:

When there is straight waive off of accounts receivable, then it reduces the balance of accounts receivables and along with that the expense in the form of bad debts will be recorded in the income statement.

This provides for an expense to be debited and an accounts receivables would decrease because it is an asset, now no more realizable.

Also the expense will be debited as the general rule of accounting states that all expenses and losses are debited.