Use of an allowance for doubtful accounts is an application of the
A) matching principle.
B) revenue recognition principle.
C) historical cost principle.
D) full disclosure principle.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts is a contra-asset account used to estimate and match the expected losses from uncollectible accounts with the revenues they helped to generate. This is an application of the matching principle, which requires that expenses be recognized in the same period as the revenues they relate to. By using an allowance for doubtful accounts, a business can recognize a portion of the estimated bad debts expense in the same period as the associated credit sales, thus improving the accuracy of the financial statements.

Use of an Allowance for Doubtful Accounts Is an Application