Which of the following is TRUE? The allowance method does not relate to bad debt

Question

Which of the following is TRUE? The allowance method does not relate to bad debts expense. It is a method used to prepare a bank reconciliation. The allowance method requires a business to estimate bad debt expense. The allowance method requires a business to record only actual bad debt expense. The allowance method allows a business to choose between recording actual or estimated bad debt expense. The period end adjusting entry for bad debt expense under the allowance method is: Bad Debt Expense, debit; Accounts Receivable/customer name, credit. Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit, not required. Cash, debit; Accounts Receivable/customer name, credit.

Explanation / Answer

25.B

The allowance method requires a business to estimate bad debt expense

( The purpose of the allowance method is to estimate the amount of bad debts, once it is provided so when actual expense is known it is written off from the allowance)

26)B

Bad debts expense Dr To allowance for bad debts Cr

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