When Writing Off a Specific Customer Account Using the Allowance

question 112

Multiple Choice

When writing off a specific customer account using the allowance method:

• A) Allowance for Doubtful Accounts decreases and Bad Debts Expense increases.
• B) Bad Debts Expense increases and Accounts Receivable decreases.
• C) Accounts Receivable increases and Allowance for Doubtful Accounts increases.
• D) Allowance for Doubtful Accounts decreases and Accounts Receivable decreases.

---

Definitions:

Capital Expenditure

Resources utilized by a business to purchase, improve, and upkeep tangible assets like real estate, factories, or machinery.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities or equity on a company’s balance sheet.

Asset Account

An account on a balance sheet that represents a resource owned or controlled by a company, expected to produce future economic benefits.

Acquisition Cost

The total expense incurred to obtain an asset, including the purchase price and all related costs to ready the asset for its intended use.