Under the allowance method, which statement about its impact on financial statements is true?

• A. Bad debt expense is recorded and a write-off decreases accounts receivable.
• B. Bad debt expense is recorded, and allowance for doubtful accounts is increased; actual write-offs reduce both AR and allowance.
• C. Bad debt expense is not recorded until a specific account is deemed uncollectible; allowance is unaffected.
• D. There is no impact on income statement or balance sheet.

Answer: (B)