Question

Our company has decided to write off an uncollectible account of $3,000. What account would we debit to record bad debt expense if our company uses the direct write-off method for bad debts?

A) bad debt expense
B) accounts receivable
C) allowance for doubtful accounts
D) cash

Answer 1

In the direct write-off method, a company writes off bad debt by debiting the bad debt expense account and crediting the accounts receivable account for the uncollectible amount.

Step-by-step explanation:

When a company decides to write off an uncollectible account using the direct write-off method, it would record the bad debt by debiting the bad debt expense account. The journal entry to write off the uncollectible account of $3,000 would include a debit to bad debt expense for $3,000 and a credit to accounts receivable for $3,000. This entry directly reduces the accounts receivable balance for the specific amount deemed uncollectible and it also increases expenses on the income statement, reflecting the cost of bad debt.