In Recording the Year-End Adjusting Entry for Bad Debt Expense

question 2

Multiple Choice

In recording the year-end adjusting entry for bad debt expense, a company would do which of the following?

• A) Debit trade receivables.
• B) Debit allowance for doubtful accounts.
• C) Credit allowance for doubtful accounts.
• D) Credit trade receivables.

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Definitions:

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.

Allowance for Doubtful Accounts

A contra-asset account designated to approximate the amount of a company's accounts receivable that is likely uncollectible.

Adjusting Entry

Journal entries made at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.

Maturity Value

The amount that will be payable to the holder of a financial instrument at the date of its maturity; it includes the principal amount plus any accrued interest.