Under the accrual basis of accounting, the expense for uncollectible accounts is estimated and recorded before specific accounts are actually written off.

Question

Quizplus · Accepted Answer

This statement is true. Under the accrual basis of accounting, the expense for uncollectible accounts is estimated and recorded in the period when the related sales are made or services are provided, even if specific accounts may not yet be known to be uncollectible. This is done through an adjusting entry to record the estimated bad debt expense and create a contra-asset account called allowance for doubtful accounts. When specific accounts are identified as uncollectible, they are then written off against the allowance account.

Under the Accrual Basis of Accounting, the Expense for Uncollectible