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Allowance Method: The procedure to write off is:- Debit Provision for Bad and Doubtful Debts and Credit to Accounts Receivable.
No Expenses are debited to the profit and loss so long as there is balance in the Provision account.
Hence the answer is : Option (3) >>>>>>> No effect for the Current Ratio as the net figure for Accounts Receivable remain unchanged.
3
Writing Off an Account under the Allowance Method
Under the allowance method, if a specific customer's ACCOUNTS receivable is identified as uncollectible, it is written off by removing the amount from ACCOUNTS Receivable. The entry to write off a bad ACCOUNT affects only balance sheet ACCOUNTS: a debit to Allowance for Doubtful ACCOUNTS and a credit to Accounts Receivable. No expense or loss is reported on the income statement because this write-off is "covered" under the earlier adjusting entries for estimated bad debts expense.
The answer3
Good answers
answer-------------3
Option3 is correct.,,,,,,,,,,,,,,,,,,,,
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