Under the Allowance Method of Uncollectible Accounts, the Entry to Reinstate

question 76

Multiple Choice

Under the allowance method of uncollectible accounts, the entry to reinstate a customer's account that had been written off affects the accounting equation by

• A) increasing an asset and decreasing an asset
• B) increasing a liability and decreasing a liability
• C) decreasing an asset and decreasing stockholders' equity (expense)
• D) decreasing a liability and increasing stockholders' equity (revenue)

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Definitions:

Operating Cycle

The period of time between the acquisition of inventory by a company and the receipt of cash from accounts receivable from the sale of that inventory.

Inventory Period

The time it takes for a company to turn its inventory into sales.

Accounts Payable Period

The duration it takes for a company to pay off its supplier invoices.

Accounts Receivable Period

The typical period a firm takes to collect receivables from its clients.