Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 17 - No. 36)
If a company uses the allowance method and estimates that $1000 of accounts receivable are uncollectible, what is the effect on the financial statements?
Assets decrease, net income decreases.
Assets decrease, net income increases.
No effect on assets, net income decreases.
No effect on assets, net income increases.
Explanation
This requires an increase to the expense account and the allowance account.
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