Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 32 - No. 39)
What is the impact on a company's net income and assets if a debt is written off under the direct write-off method?
Net income decreases, assets decrease.
Net income increases, assets increase.
Net income is unaffected, assets decrease.
Net income decreases, assets are unaffected.
Explanation
Under the direct write-off method, bad debt expense is recognized, reducing net income and also accounts receivable (an asset).
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