A Company Uses the Direct Write-Off Method to Account for Bad

question 153

Multiple Choice

A company uses the direct write-off method to account for bad debts.What is the impact on the accounting equation of the entry to record the write-off of a customer's account balance?

• A) Assets and liabilities decrease.
• B) Assets and shareholders' equity decrease.
• C) Shareholders' equity and liabilities decrease.
• D) Assets increase and shareholders' equity decreases.

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Definitions:

Profitability Ratios

Ratios that measure the amount of operating income or net income an organization is able to generate relative to its assets, owners’ equity, and sales.

Return On Equity

Net income divided by owners’ equity; also called return on investment (ROI).