Question

Shown below are several accounts from a company's ledger with each account preceded by an identification number, and a transaction completed by this company. Indicate the number corresponding to the account debited and the number corresponding to the account credited when journalizing this transaction.

1. Accounts payable
2. Accounts receivable
3. Allowance for doubtful accounts
4. Bad debt expense
5. Cash
6. Factoring Fee Expense
7. Interest earned
8. Interest expense
9. Interest receivable
10. Notes payable
11. Notes receivable
12. Sales

Transaction - Wrote off an account using the direct write off method. The number corresponding to the account debited is ______________ and the number corresponding to the account credited is _______________.

Answer 1

The account debited is Bad debt expense (4) and the account credited is Accounts receivable (2) when writing off an account using the direct write off method.

Step-by-step explanation:

When journalizing the transaction for writing off an account using the direct write off method, the account debited is the Bad debt expense (4), and the account credited is the Accounts receivable (2). This reflects the fact that the business recognizes that the receivable will not be collected, thus incurring an expense. In this transaction, the business would debit the Bad Debt Expense account to represent the cost associated with the uncollectible receivable and would credit the Accounts Receivable account to reduce the amount displayed on the balance sheet. No cash changes hands in this type of entry.