After making an adjusting entry, what effect does recognizing bad debt expense have on accounts?

Recognizing bad debt expense directly impacts the company's financial statements by reducing net income. When a business acknowledges that certain accounts receivable are unlikely to be collected, it records a bad debt expense. This expense is a recognition that some of the company's sales will not convert into cash, which reflects a more accurate picture of the company's profitability.

As the bad debt expense is recorded, it is typically debited, which directly reduces the total revenue reported as net income. This corrective action ensures that the financial records provide a realistic view of income and expenses, facilitating better financial decision-making.

The other options do not convey the correct relationship with bad debt expense. For instance, recognizing bad debt does not reduce accounts receivable directly; instead, it affects the balance sheet through an allowance for doubtful accounts. Additionally, it does not increase net income nor does it increase cash flow; in fact, it represents an anticipated loss, thus lowering net income and indicating a reduction in expected cash inflows from those accounts.