PRC-1 · Chapter 10 · Question 82 of 100
If the Allowance for Doubtful Debts needs to be increased at year-end, what is the accounting entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Bad Debts Expense, Credit Allowance for Doubtful Debts
Explanation
An increase in the allowance represents an anticipated loss, which is recorded as an expense (Debit Bad Debts Expense) and an increase to the contra-asset provision (Credit Allowance for Doubtful Debts).
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