Asked by Janysh Kudaibergenov on Jul 07, 2024
Verified
When using the allowance method of accounting for uncollectible accounts,the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.
Allowance Method
An accounting technique used to estimate and account for bad debts, where a portion of receivable accounts is deemed uncollectable.
Bad Debt Recovery
Occurs when a previously written-off debt is recovered either partially or fully after receiving payment from a debtor.
- Learn about the role and implementation of the allowance strategy in managing uncollectible accounts in accounting.
- Distinguish between the treatment of accounts receivable under the allowance method versus the direct write-off method.
Verified Answer
SW
shantay whiteJul 13, 2024
Final Answer :
False
Explanation :
The recovery of a bad debt would be recorded as a debit to Cash and a credit to the Allowance for Doubtful Accounts, not Bad Debts Expense. This is because the bad debt expense was already recorded when the customer initially defaulted on the payment, and the recovery is simply reducing the amount of the previously established allowance.
Learning Objectives
- Learn about the role and implementation of the allowance strategy in managing uncollectible accounts in accounting.
- Distinguish between the treatment of accounts receivable under the allowance method versus the direct write-off method.
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