[shawnl112]

Bees Co. uses the direct write-off method to account for uncollectible accounts receivable. During an accounting period, Bee’s cash collections from customers equal sales adjusted for the addition or deduction of the following amounts:

Account Written-off Increase in Accounts Receivable Balance
A. Addition Addition
B. Deduction Deduction
C. Deduction Addition
D. Addition Deduction

I suppose the answer is a “decrease in Account receivable” since we are removing Account receivable off the books with a credit therefore we are Deducting “Increase in Accounts Receivable Balance”

And Account Written off is Allowance for doubtful account which is removed with a credit and also decreased.

Is this the way we would look at this? By understanding the journal entry used is

Debit: Allowance for doubtful accounts X
Credit: Accounts Receivable X

[Still Drowning]

Hi Shawn,

The direct write off method does not use the allowance. Direct write-off actually means what it is said right there. You directly write it off. In other words, you debit bad debt expense and credit a/r for the amount to be written off – nothing more (very straight forward!)

The allowance is only used when the question states the company uses an allowance and/or does not use the direct write off.

Hope this helps!

Study hard – t minus 16 hours for the Q4 results!

[Author]

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