The Allowance for Doubtful Accounts is called a valuation account,or contra-asset account,and normally has a credit balance.

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The Allowance for Doubtful Accounts is a valuation account that is used to estimate the amount of accounts receivable that are unlikely to be collected. It is a contra-asset account because it reduces the overall balance of accounts receivable on the balance sheet. The Allowance for Doubtful Accounts normally has a credit balance because it is a reserve for potential bad debts.

The Allowance for Doubtful Accounts Is Called a Valuation Account,or