How do uncollectible accounts affect income statements, balance sheets, and statements of cash flows?
December 9, 2009 - 4:26 pm
When you write off doubtful accounts, how does it affect your income statements, balance sheets, and statements of cash flows?
This is just a general question. The assignment gave numbers and such, but the information was so limited. I really like your answer. I’m still confused on why it is that way though.
Answer:
When using the allowance method:
No effect on income statement
No effect on balance sheet
No effect on statement of cash flows
When using the direct - write off method:
Income statement: Expenses will increase (net income will decrease)
Balance sheet: Total assets will decrease
No effect on statement of cash flows
December 9th, 2009 at 9:59 pm
Answer:
When using the allowance method:
No effect on income statement
No effect on balance sheet
No effect on statement of cash flows
When using the direct - write off method:
Income statement: Expenses will increase (net income will decrease)
Balance sheet: Total assets will decrease
No effect on statement of cash flows
References :
My brain only.