Says that the doubtful accounts were reduced by so much… then why is the answer saying it should be reversed? to be prudent?
When you reduce doubtful accounts its a sign of manipulation and the analyst may want to reverse it. Reducing doubtful accounts is always seen as bad.
Wouldn’t you then increase A/R by reversing it? All of the options say decrease
AP goes up b/c the analyst likes to think the AP wont get paid off
No, you would want to decrease A/R…because the allowance for doubtful accounts is a contra account to A/R. The higher “allowance for doubtful accounts” is, the lower net A/R is. If you are lowering the “allowance for doubtful accounts” (without any valid reason) you are artificially making it look like your A/R is higher.
right, thanks. I’ve studied myself retarded.
damn, ur right im retarded too
So whats the other adjustment to make it all balance? Reduce A/R and . . .
and increase allowance for doubful accounts.
pump down equity? thats a total shot in the dark ironically i got this right in the exam 
viva italia 1luv
I’ll slap myself in the face so you don’t have to.
Allowance for Doubtful Accounts is actually a contra asset, the decrease of A/R and the increase of allowance for doubtful accounts both happen on the asset side.