Which of the following statements does not correctly describe the allowance for doubtful accounts balance?
A)It is reported on the balance sheet as a component of current assets.
B)It is a contra-asset account.
C)It is reported on the balance sheet as a component of stockholders' equity.
D)It is created as a result of the adjusting entry to record bad debt expense.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts is a contra-asset account used to reduce the balance of accounts receivable to their net realizable value, and is reported on the balance sheet as a component of current assets. It is created as a result of the adjusting entry to record bad debt expense. It is not reported on the balance sheet as a component of stockholders' equity.

Which of the Following Statements Does Not Correctly Describe the Allowance