Which Of The Following Does Not Reduce The Balance In Accounts Receivable?

Multiple Choice Question Answer | Which Of The Following Does Not Reduce The Balance In Accounts Receivable?

Reason: The correct answer is (c) "Recognizing bad debts expense", as the journal entry for recognizing bad debts expense is resulted in a debit to Bad Debt Expense Account Or Doubtful Debts Account Or Uncollectible Accounts Expense Account and a credit to Allowance for Bad Debts Account Or Allowance for Doubtful Account Or Provision for Doubtful Debts Account. It is just an estimation that a percentage of sales or accounts receivable may not be recovered from customers in future. So, it does not affect Accounts Receivable / Sundry Debtors.

Accounts receivable account is only reduced when there is Actual Bad Debt Expense Or Bad Debts Written Off which means some of the debts due from customers are not paid to the company. So, it decreases the accounts receivable account / sundry debtors account. When actual bad debts are occurred, the journal entry to record is to debit actual bad debts expense account and a credit to accounts receivable account.