Bee Co. uses the direct write-off method to account for uncollectible accounts receivable. During an accounting period, Bee's cash collections from customers equal sales adjusted for the addition or deduction of the following amounts

 Bee Co. uses the direct write-off method to account for uncollectible accounts receivable. During an accounting period, Bee's cash collections from customers equal sales adjusted for the addition or deduction of the following amounts:
Accounts

written off
Increase in

accounts receivable

balance
Deduction
Deduction
Addition
Deduction
Deduction
Addition
Addition
Addition
 You Answered Correctly!

Deduction, Deduction

 
The solutions approach is to set up T-accounts for the related accounts.

AR
Beg. Bal.    Collections
Sales    Write-offs
End. Bal.      
Sales are debited to AR and credited to sales; collections are debited to cash and credited to AR. Under the direct write-off method, write-offs of customer accounts are debited to bad debts expense, and credited to AR. To adjust sales to cash collections from customers, Bee must subtract the increase in accounts receivable (because Bee has not yet received cash for the sales remaining in AR). Bee must also subtract the accounts written off, because these sales have not resulted in cash receipts (and probably never will).