On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets? Mutiple Choice Decrease in net income; no effect on total assets. No effect on net income; no effect on total assets. Decrease in net income; decrease in total assets. Increase in net income; no effect on total assets. No effect on net income; decrease in total assets
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the direct write-off method is used to account for
-
Decrease in net income; no effect on total assets.
-
No effect on net income; no effect on total assets.
-
Decrease in net income; decrease in total assets.
-
Increase in net income; no effect on total assets.
-
No effect on net income; decrease in total assets
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
