Final answer:
When using the allowance method, writing off an account causes both accounts receivable and the allowance for doubtful accounts to decrease, which is choice b.
Step-by-step explanation:
When an account is written off using the allowance method, the correct answer is b. decreases and the allowance account decreases.
In this method, a contra account to accounts receivable, known as the allowance for doubtful accounts (or allowance for uncollectible accounts), is used to estimate the amount of receivables that will not be collected. When a specific account is deemed uncollectible, the amount is written off by reducing both the accounts receivable and the allowance account accordingly. This entry does not affect the net income because the expense was already recognized when the allowance was initially estimated.
To illustrate, if a company writes off a $500 debt, the journal entry would debit the allowance for doubtful accounts for $500 and credit accounts receivable for $500, thus reducing both accounts.
The allowance method is an estimate of the amount the company expects will be uncollectible made by debiting bad debt expense and crediting allowance for uncollectible accounts. If a specific account becomes uncollectible, it will debit allowance for doubtful accounts and credit accounts receivable.