The allowance method of accounting for uncollectible receivables ________.
A) is used to measure bad debts
B) violates the matching principle
C) records bad debt expense in the period the accounts receivable is written off
D) requires the use of a contra liability account

Question

Quizplus · Accepted Answer

The allowance method is used to estimate and measure bad debts expense by predicting which accounts receivable will be uncollectible, aligning with the matching principle by recording expenses in the same period as the revenues they helped generate. It does not violate the matching principle, it records bad debt expense based on estimation rather than at the specific time of write-off, and it uses a contra asset account (Allowance for Doubtful Accounts), not a contra liability account.

The Allowance Method of Accounting for Uncollectible Receivables ________