Question

The entry required to recognize the bad debts expense for 2017 will

a.increase total assets and decrease net income.

b.increase total assets and retained earnings.

c.decrease total assets and increase net income.

d.decrease total assets and retained earnings.

Answer 1

Any entry for recognising bads debts expenses will result in decreasing the accounts receivable and retained earning.

Hence option d] is correct,

Explanation-

The Bad debt expenses will increase the Expenses which will indirectly decrease the retained earning.And the Journal entry will have increase in Allowances for doubtful debts,which is adjusting account with credit balance, in the end it will be shown as reduction from accounts receivables.Hence reductiuon in Accounts receivable is decrease in Asset.

Please comment for any explanation,

Thanks,