The allowance for uncollectible accounts is necessary because
A)a liability results when a credit sale is made.
B)when recording uncollectible accounts expense,it is not possible to predict specifically which accounts will not be collected.
C)management should know how many credit losses have been sustained over the years.
D)uncollected accounts that are written off must be accumulated in a separate account.

Question

Quizplus · Accepted Answer

The allowance for uncollectible accounts is necessary because it is not possible to predict specifically which accounts will not be collected when recording uncollectible accounts expense. The allowance is an estimate of the total amount of outstanding receivables that will become uncollectible in the future. It helps to match the revenue and expense because the bad debt expense is recorded in the period that the related sales are made. The allowance for uncollectible accounts is also referred to as the provision for doubtful accounts or bad debt reserve.

The Allowance for Uncollectible Accounts Is Necessary Because