Final answer:
The adjustment for increased expectations of uncollectible accounts receivable causes an increase in bad debt expense and allowance for doubtful accounts, but does not reduce the gross accounts receivable, which remains unchanged until a specific account is written off.
Step-by-step explanation:
When Thomas Company expects an increase in uncollectible accounts receivable, it must adjust its accounting to reflect this projection. The correct option that does not occur on the company’s financial statements is that 'Accounts receivables (gross) is reduced' (Option B). Instead, what actually occurs includes: increasing the bad debt expense (which is an expense reported on the income statement that reduces net income), and increasing the allowance for doubtful accounts (which is a contra-asset account shown on the balance sheet that reduces the net accounts receivable).
The allowance for doubtful accounts is increased to reflect the new expectation of uncollectibility, while the gross accounts receivable remains unchanged until an account is actually written off. When the write-off occurs, that's when the gross accounts receivable is reduced. Therefore, the adjustment initially affects only the net accounts receivable (gross accounts receivable minus the allowance for doubtful accounts) and not the gross amount itself.