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?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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?
A
Debit Accounts Receivable; Credit Allowance for Doubtful Accounts
B
Debit Allowance for Doubtful Accounts; Credit Accounts Receivable
C
Debit Bad Debt Expense; Credit Accounts Receivable
D
Debit Cash; Credit Accounts Receivable
Verified step by step guidance1
Understand the allowance method: Under the allowance method, bad debts are estimated and recorded in advance using an Allowance for Doubtful Accounts, which is a contra-asset account that reduces Accounts Receivable.
Recognize the reinstatement process: When an account receivable that was previously written off is recovered, the reinstatement involves reversing the write-off entry to restore the receivable and the allowance account.
Identify the correct accounts: To reinstate the account, you need to debit Accounts Receivable to restore the asset and credit Allowance for Doubtful Accounts to reverse the reduction in the allowance account.
Understand the journal entry format: The journal entry for reinstatement under the allowance method is: Debit Accounts Receivable and Credit Allowance for Doubtful Accounts.
Review the options provided: Compare the correct journal entry format to the options given in the problem to confirm the correct choice.
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