Practice prompt · Q:receivables-notes-credit-losses-and-transfers/allowance-terms-and-effects-001

Say what a write-off and a recovery each move

Tests whether the learner knows which allowance events touch expense and which are balance sheet reclassifications.

Updated Sep 11, 2026 Review due Nov 18, 2026

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The allowance method separates two questions: how much of the portfolio will not be collected, answered by estimation, and which accounts they were, answered later by a write-off.

Choose the best answer. a A write-off reduces both the allowance and gross receivables, leaving net receivables and expense unchanged. b A write-off increases credit loss expense in the period the account is identified. c A write-off reduces gross receivables and net receivables by the same amount. d A recovery is recorded as revenue when the cash arrives.

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Answer: a

Choice a. Expense moves when the allowance is estimated, not when a specific account is written off.