Question

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

a.Accounts Receivable

b.Allowance for Doubtful Accounts

c.Uncollectible Accounts Expense

d.Interest Expense

Answer 1

The answer to this question will be option (a) Accounts Receivable. It is because under the direct-write off method, account receivable is credited to write off the customer account.The direct write off method recognizes bad debts as an expense when it is judged to be uncollectible. Bad Debt is recorded as an expense for the amount which is determined will not be paid. The answer is not option (b) because Allowance for Doubtful Accounts is credited under allowance method. The answer is not option (c) because Uncollectible Accounts Expense cannot be credited as the amount is required to be written off from receivables. The answer is not option (d) because uncollectible receivables is not a type of Interest expense, so it won't be credited.