A company that uses the allowance method to account for uncollectible accounts
A)Records Uncollectible Accounts Expense when a receivable is written off.
B)Does not record uncollectible accounts until the amount becomes significant.
C)Reports the net realizable value of its accounts receivable on the balance sheet.
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

A company that uses the allowance method to account for uncollectible accounts estimates the amount of accounts that may not be collected and creates an allowance for doubtful accounts. This allowance is subtracted from the accounts receivable balance to report the net realizable value of accounts receivable on the balance sheet. When an account is deemed uncollectible, the allowance for doubtful accounts is used to write off the account, and Uncollectible Accounts Expense is recorded. Therefore, options A and B are incorrect.

A Company That Uses the Allowance Method to Account for Uncollectible