The allowance for doubtful accounts,which appears as a deduction from accounts receivable on a balance sheet,is an application of the
A) going-concern assumption.
B) revenue recognition principle.
C) matching principle.
D) materiality constraint.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts is an application of the matching principle, which requires businesses to recognize expenses in the same period as the revenue they helped generate. The allowance is an estimate of the amount of accounts receivable that a business is unlikely to collect, and is therefore recorded as an expense (specifically, a bad debt expense) in the same period as the related revenue. This expense is then subtracted from the accounts receivable balance on the balance sheet to arrive at the net realizable value of accounts receivable.

The Allowance for Doubtful Accounts,which Appears as a Deduction from Accounts