When the allowance method of recognizing uncollectible accounts is used, how would the collection of an account previously written off affect accounts receivable and the allowance for uncollectible accounts?
Accounts receivable                 Allowance for uncollectible accounts
a.          No effect                                Decrease
b.          No effect                                Increase
c.          Increase                                  Decrease
d.          Increase                                  No effect
Answer:B
Choice "b" is correct. Accounts receivable - No effect; Allowance for uncollectible accounts - Increase.
Under the allowance method, the following journal entries are recorded when an account previously written off is subsequently collected:
JE #1 - To restore the account previously written off:
                                                     Debit (Dr)        Credit (Cr)
Accounts receivable                                     XX
Allowance for uncollectible accounts                                    XX
JE #2 - To record the cash collection on the account:
                                                           Debit (Dr)       Credit (Cr)
Cash                                                          XX
Accounts receivable                                                         XX
The debit to accounts receivable in JE#1 is offset by the credit to accounts receivable in JE #2, so there is no effect on accounts receivable. The credit to the allowance for uncollectible accounts in JE #1 increases the allowance.
Choices "c", "d", and "a" are incorrect, per the above.