Gamer Inc. determines that it cannot collect $60 owed to it by its customer T. J

Question

Gamer Inc. determines that it cannot collect $60 owed to it by its customer T. Jacobs. Gamer uses the direct write-off method. How would the company record this transaction?

Debit Bad Debt Expense for $60 and credit Accounts Receivable-T. Jacobs for $60.

Debit Allowance for Doubtful Accounts for $60 and credit Accounts Receivable-T. Jacobs for $60.

Debit Bad Debt Expense for $60 and credit Allowance for Doubtful Accounts for $60.

Debit Notes Receivable-T. Jacobs for $60 and credit Accounts Receivable-T. Jacobs for $60.

Debit Accounts Receivable-T. Jacobs for $60 and credit Notes Receivable-T. Jacobs for $60.

Explanation / Answer

When direct method is used no allowance is created we simply write off that account hence entry will be:-

Hence option( A) Debit Bad debts expense and credit Accounts recievable - T jacobs

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