Which of the following is true of the treatment of bad debts expense in the allowance method of accounting for bad debts?
A) Bad debts expense is provided in advance by estimating the expenses.
B) Bad debts expense is credited in the adjusting entry to create provision for bad debts.
C) Bad debts expense is recorded as the difference between the estimated and actual uncollectible accounts.
D) Bad debts expense is treated as a deduction from Accounts Receivable.

Question

Quizplus · Accepted Answer

The allowance method involves estimating bad debts expense in advance and recording it in the period the related sales occur, not when the specific accounts are deemed uncollectible. This matches expenses with revenues in the period they are incurred, adhering to the matching principle of accounting.

Which of the Following Is True of the Treatment of Bad