PRC-1 · Chapter 10 · Question 83 of 100
If the Allowance for Doubtful Debts needs to be decreased at year-end, what is the accounting entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Allowance for Doubtful Debts, Credit Bad Debts Expense (or Other Income)
Explanation
A decrease in the allowance is a reduction of a previously anticipated loss. The contra-asset must be reduced (Debit Allowance) and the income statement credited (Credit Bad Debts Expense or Other Income).
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