How should a decrease in accounts receivable be recorded?

A decrease in accounts receivable should be recorded as a credit to Assets. Accounts receivable represents amounts owed to the business by customers; therefore, when accounts receivable decreases, it indicates that customers have either paid their debts or have been written off, reducing the amount owed to the business. This decrease is recorded as a credit because it results in a reduction in the asset account. In accounting, asset accounts, including accounts receivable, decrease through credits.

Recording this decrease properly is crucial for maintaining accurate financial statements. This transaction impacts the balance sheet by reflecting the true state of assets the company can access. The other choices involve incorrect aspects of accounting, such as debiting liabilities or incorrectly representing asset reductions, leading to overstated values within financial records.