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Subject Topic: A/R question doubt (Topic Closed Topic Closed) Post ReplyPost New Topic
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Joined: 31 Oct 2016
Location: United States
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Posted: 06 Dec 2016 at 15:01 | IP Logged  

Look at the answer it provides: b.Affects neither net
income nor accounts receivable... There is movements in
the A.R even though the net AR remains the same.. So in
reality it does affect AR but does not decrease net AR
so in logic the answer would be the other one
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Joined: 07 Jun 2017
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Posted: 07 Jun 2017 at 00:46 | IP Logged  

Hi the working capital is not effected since allowance
for bad debts is a contra account. Hence AR net balance
is AR (debit balance):less allowance which will be the
same, irrespective of write off of the uncollectible
accounts. Bad debt expense has already been recorded in
the year of sale by creating a provision. (Ref: matching
principle). Any further write off is just entries
between AR and contra account: allowances)
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