Question

Zino Company determines that a customer balance of $200, from Hollis Co., is uncollectible. Zino uses the allowance method to account for bad debts.

The entry to write off the uncollectible balance will include a:

A) debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
B) debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
C) debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
D) debit to Allowance for Doubtful Accounts and a credit to Bad Debts Expense.

Answer 1

debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

Step-by-step explanation:

In accounting the allowance method is used to recognise and post portions of account recievable that is uncollectible. It involves an adjusting entry that changes the balance sheet figure for account receivable.

For example in the given instance a customer balance of $200, from Hollis Co., is uncollectible. The allowance method is used to pass the following entry:

debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable of $200