Which of the following statements regarding the allowance for doubtful accounts is true?
A)Under the aging of accounts receivable method,bad debt expense is calculated and then added to the beginning balance in the allowance for doubtful accounts.
B)The allowance for doubtful accounts is a contra-revenue account.
C)The allowance for doubtful accounts is credited when a specific write-off is recorded.
D)The allowance for doubtful accounts has a normal credit balance.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts is a contra-asset account and has a normal credit balance. This means that it is used to reduce the balance of accounts receivable to its net realizable value. The amount of the allowance is typically estimated using one of several methods, including the percentage of sales method or the aging of accounts receivable method. When a specific write-off is recorded, the accounts receivable is debited and the allowance for doubtful accounts is credited.

Which of the Following Statements Regarding the Allowance for Doubtful