Which statement is correct about recording an allowance for doubtful accounts?

Question

Quizplus · Accepted Answer

Recording an allowance for doubtful accounts involves creating a contra account to offset accounts receivable and adjusting the net accounts receivable balance. This adjustment reflects estimates and judgments about the likelihood of collecting on outstanding customer balances, which requires creating an allowance for doubtful accounts. The allowance reflects known and anticipated uncollectible amounts, which improves the comparability of financial statements from one period to the next. Therefore, Option B is the correct statement.

Which Statement Is Correct About Recording an Allowance for Doubtful