Under the allowance method for estimating uncollectible accounts:
A)a company sets up an Allowance for Uncollectible Accounts to estimate the amount of the receivables the company does not expect to collect.
B)the Allowance for Uncollectible Accounts is a contra account to gross Accounts Receivable.
C)the Allowance for Uncollectible Accounts will normally have a credit balance.
D)all of the above.

Question

Quizplus · Accepted Answer

All of the statements given in the options are correct in the allowance method for estimating uncollectible accounts. In this method, a company estimates the amount of accounts receivable that may not be collected in the future and sets up an allowance (contra) account to offset the gross accounts receivable. The allowance account is credited, and it normally carries a credit balance. Therefore, option D is the correct answer.

Under the Allowance Method for Estimating Uncollectible Accounts