Asked by Lesley Figueroa on Jul 11, 2024

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Under the direct write-off method of uncollectible accounts, if a written off account is later collected, the effect on the accounting equation is

A) an increase in assets and an increase in liabilities
B) an increase in liabilities and a decrease in stockholders' equity (expense)
C) a decrease in assets and an increase in stockholders' equity (expense)
D) a decrease in assets and a decrease in stockholders' equity (expense)

Direct Write-Off Method

A method of accounting for bad debts that charges the amount of an outstanding account directly to the expense account at the time it is deemed uncollectable.

Accounting Equation

A fundamental principle of accounting that equates assets with the sum of liabilities and shareholders' equity (Assets = Liabilities + Equity).

  • Acquiring knowledge on how to apply the direct write-off method to uncollectible accounts and its consequent effect on the accounting equation.
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LT
Le Thi Huong (K14 DN)Jul 15, 2024
Final Answer :
C
Explanation :
Under the direct write-off method, the written-off account has already been recognized as an expense and a decrease in assets. Therefore, when the account is later collected, it is treated as an increase in assets and an increase in stockholders' equity (expense). There is no effect on liabilities.