The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the
A)consistency characteristic.
B)matching principle.
C)materiality constraint.
D)revenue recognition principle.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts is based on the matching principle, which states that expenses should be recognized in the same period as the revenue they help to generate. By estimating bad debts and deducting them from accounts receivable, a company can more accurately match the costs of doing business with the revenue generated.

The Allowance for Doubtful Accounts, Which Appears as a Deduction