The Allowance for Doubtful Accounts represents:
A)Cash set aside to make up for bad debt losses.
B)The amount of uncollectible accounts written off to date.
C)The difference between total credit sales and collections on credit sales.
D)The difference between the face value of accounts receivable and the net realizable value of accounts receivable.

Question

Quizplus · Accepted Answer

The Allowance for Doubtful Accounts is a contra asset account that is used to reduce the carrying value of accounts receivable to their net realizable value. This means that it represents the estimated amount of accounts receivable that are not expected to be collected. Therefore, the correct option is D.

The Allowance for Doubtful Accounts Represents