Question

Hillside Garden Co. uses the aging of accounts receivable method to determine its allowance for uncollectible accounts. On January 16, Hillside Garden Co. wrote off an uncollectible account in the amount of $1,300. What effect does the write off have on the company’s financial statements

Answer 1

The answer is: The write off will reduce the Accounts Receivables account in the balance sheet by $1,300.

Explanation:

When you use the aging method for determining uncollectible accounts, this will affect the balance sheet.

The January 16 records should be:

• Dr Allowance for Doubtful Accounts 1,300
• Cr Accounts Receivables 1,300

The write off will reduce the Accounts Receivables account in the balance sheet by $1,300. The Allowance for Doubtful Accounts account is a contra asset account that reduces the value of assets in the balance sheet.