Question

VFC writes off $800 receivable from Fast Fashions because the company could not pay its account.

a. Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts
b. Debit Allowance for Doubtful Accounts, Credit Bad Debt Expense
c. Debit Bad Debt Expense, Credit Accounts Receivable
d. Debit Accounts Receivable, Credit Bad Debt Expense

Answer 1

The correct entry to write off an uncollectible receivable is to debit the Allowance for Doubtful Accounts and credit Accounts Receivable. This reflects the removal of the uncollectible amount from the company's books without affecting the current period's income statement. The correct option is B.

Step-by-step explanation:

The correct accounting entry when a company writes off a receivable because the customer could not pay their account is to debit the Allowance for Doubtful Accounts and credit Accounts Receivable.

This entry removes the specified amount from the company's accounts receivable balance and simultaneously reduces the allowance for doubtful accounts, which is a contra asset account that had been previously established to anticipate such losses.

Option b, 'Debit Allowance for Doubtful Accounts, Credit Accounts Receivable', is the correct choice. This entry does not impact the income statement immediately since the expense was recognized when the allowance was initially created.