If a company debits Allowance for doubtful accounts and credits Accounts receivable it is recording the
Blank
______.

Question

If a company debits Allowance for doubtful accounts and credits Accounts receivable it is recording the 
Blank
______.

BlackTom AI · Accepted Answer

Debiting Allowance for Doubtful Accounts and crediting Accounts Receivable records the write-off of a specific uncollectible account.

1. Relevant knowledge points and concepts
- Allowance method: companies estimate bad debts in advance by creating a contra-asset account called Allowance for Doubtful Accounts (credit balance). This follows the matching principle (expense recognized in same period as related sales).
- When a particular customer account is determined uncollectible, the account is written off against the existing allowance; this reduces both Accounts Receivable and the Allowance for Doubtful Accounts without affecting bad debt expense at the time of write-off.

2. Step-by-step reasoning process
- Initially an estimate is recorded: Debit Bad Debt Expense; Credit Allowance for Doubtful Accounts.
- Later a specific account becomes uncollectible. To remove it from the books: Debit Allowance for Doubtful Accounts (reducing the contra-asset) and Credit Accounts Receivable (removing the particular customer balance).
- Example journal entries:
  a) Estimate (period expense): Debit Bad Debt Expense $1,000; Credit Allowance for Doubtful Accounts $1,000.
  b) Specific write-off: Debit Allowance for Doubtful Accounts $200; Credit Accounts Receivable $200.

3. Intermediate steps (calculation of net realizable value)
- Before write-off: Accounts Receivable $10,000, Allowance $1,000 → Net realizable value = $9,000.
- After write-off of $200: Accounts Receivable $9,800, Allowance $800 → Net realizable value = $9,000 (unchanged), showing the write-off just reallocates amounts within receivables and allowance.

4. Why the correct answer is correct
- The described entry directly matches the standard write-off entry under the allowance method: debit the allowance (decrease contrа-asset) and credit AR (remove specific receivable). No new expense is recognized at write-off because the expense was recognized earlier when the allowance was created.

5. Why other options are incorrect
- Return of goods: would use Sales Returns/Allowances and possibly Inventory, not debit Allowance for Doubtful Accounts.
- Adjusting entry for estimated bad debts: that entry debits Bad Debt Expense and credits Allowance, not debit Allowance and credit AR.
- Allowance for discounts: sales discounts are contra-revenue accounts or involve Sales Discounts, not the Allowance for Doubtful Accounts contra-asset.

6. Conclusion
The correct choice is “write off of a specific uncollectible account,” which matches the provided answer.

If a company debits Allowance for doubtful accounts and credits Accounts receivable it is recording the Blank ______.单项选择题

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