Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Which of the following is the correct journal entry to record the reinstatement of an account receivable that was previously written off under the allowance method?

Debit Cash; Credit Accounts Receivable

Debit Accounts Receivable; Credit Allowance for Doubtful Accounts

Debit Allowance for Doubtful Accounts; Credit Accounts Receivable

Debit Bad Debt Expense; Credit Accounts Receivable

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Verified step by step guidance

Understand the allowance method: Under the allowance method, bad debts are estimated and recorded in advance using an Allowance for Doubtful Accounts. When an account receivable is written off, it is removed from Accounts Receivable and the Allowance for Doubtful Accounts is reduced.

Recognize the reinstatement process: If a previously written-off account receivable is recovered, it must first be reinstated before recording the cash receipt. Reinstating the account involves reversing the write-off entry.

Determine the correct accounts: To reinstate the account receivable, you need to debit Accounts Receivable to restore the amount owed by the customer and credit Allowance for Doubtful Accounts to reverse the reduction made during the write-off.

Understand why other options are incorrect: For example, 'Debit Cash; Credit Accounts Receivable' is used when cash is received, not for reinstatement. 'Debit Bad Debt Expense; Credit Accounts Receivable' is incorrect because bad debt expense is not involved in reinstatement.

Apply the correct journal entry: The correct journal entry for reinstating the account receivable is 'Debit Accounts Receivable; Credit Allowance for Doubtful Accounts,' as this reverses the write-off and restores the receivable to the books.