1 answer

When the company received an official notice that the customer is not going to pay the...

Question:

When the company received an official notice that the customer is not going to pay the debt, what effect does it have on the
When the company received an official notice that the customer is not going to pay the debt, what effect does it have on the accounting equation if the allowance method is used? Select one: a. Decreases assets and decreases liabilities b. Increases assets and increases stockholders' equity. c. No effect on the accounting equation d. Decreases assets and decreases stockholders' equity.

Answers

No effect on the accounting equation.

When it gets notice about that the customer will not pay the sum of money, the entry will be a debit to allowance for doubtful and a credit to accounts receivable. Here allowance of doubtful is a contra asset account and hence there will be no change in the accounting equation.

Hence, option C is the correct answer.

SUMMARY:

Option C is the correct answer.

.

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