Homework Answers
Answer : "A" : Assets would decrease, liabilities would remain constant and retained earnings would decrease
Reason :
| Entry for 500$ account receivable write-off would be as follows : | ||||
| S. No. | Account | Dr. ($) | Cr. ($) | Impact on Assets/Liabilities/Retained Earnings |
| 1 | Bad debt expense a/c ..Dr | 500 | Decrease in profit leading to decrease in retained earnings | |
| To Account Receivable a/c | 500 | Decrease in Assets | ||
From the above entry it is evident that there is a decrease in assets and retained earnings with no change in the liabilities and hence the answer is "A".
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