Question

When a company is using the direct​ write-off method, and an account is written​ off, the journal entry consists of a​ ________. A. debit to the Allowance for Bad Debts and a credit to Accounts Receivable B. credit to Accounts Receivable and a debit to Bad Debts Expense C. debit to Accounts Receivable and a credit to Cash D. credit to Accounts Receivable and a debit to Interest Expense

Answer 1

B.

Step-by-step explanation:

An uncollectible account or bad debt is an account receivable that the business cannot collect. Businesses account for bad debts by using :

-the allowance method.

-the direct write-off method .

The direct write-off method is primarily used by businesses with few credit customers. When it is determined that a customer is not going to pay, the uncollectible account is removed from the records.

To remove from the records, there is a credit to Accounts Receivable (asset account, increase by the debit) and a debit to Bad Debts Expense (expense account, increase by the debit).