Question

Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts total assets are unchanged. liabilities decrease. total assets decrease. net income is unchange

Answer 1

Total assets decrease

Allowance for uncollectible accounts are shown in balance sheet by reducing it from balance of accounts receivable and accounts receivable are shown at its net receivable value so allowance for uncollectible accounts decreases the asset side of Balan sheet.

For example if a company's total account receivable is $1000 and estimated allowance for uncollectible accounts is $500 the same will be shown in balance sheet as follows :

Account receivable $1000

Less allowance. $500

Net account receivable$9500