The entry to record the write-off of Blue Devil Inc.’s account using the allowance method is: Group of answer choices Debit Allowance for Doubtful Accounts; Credit Accounts Receivable – Blue Devil Inc. Debit Bad Debts Expense; Credit Allowance for Doubtful Accounts Debit Accounts Receivable – Blue Devil Inc.; Credit Allowance for Doubtful Accounts Debit Bad Debts Expense; Credit Accounts Receivable – Blue Devil Inc.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The entry to record the write-off of Blue Devil Inc.’s account using the allowance method is:
Allowance for Doubtful Accounts:
The allowance for doubtful accounts is a reduction of the total amount of account receivable appearing on a company’s balance sheet, and is listed as a deduction immediately below the accounts receivable line item. This deduction is classified as a contra asset account. The allowance represents management’s best estimate of the amount of accounts receivable that will not be paid by customers.
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