The account Allowance for Doubtful Accounts is necessary because
A)when recording bad debts expense, it is not possible to know which specific accounts will default.
B)uncollectible accounts that are written off must be accumulated in a separate account.
C)a liability results when a credit sale is made.
D)management needs to accumulate all the credit losses over the years.

Question

Quizplus · Accepted Answer

The Allowance for Doubtful Accounts is a contra-asset account that is used to estimate the amount of receivables that may not be collected. This estimation is necessary because at the time of recording bad debts expense, it is not possible to know which specific customer accounts will not pay.

The Account Allowance for Doubtful Accounts Is Necessary Because