Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 46 - No. 29)
Which of the following correctly states the effect on the accounting equation from writing off an account receivable using the allowance method?
Assets increase, liabilities increase.
Assets decrease, equity decreases.
No impact on assets, liabilities, or equity.
Assets decrease, liabilities increase.
Explanation
Since the allowance method is used, the write-off simply reduces both the balance of accounts receivable and the allowance for doubtful accounts.
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