Which of the following is TRUE of the proper balance sheet treatment of the Allowance for uncollectible accounts?
A) The Allowance for uncollectible accounts is reported as a current liability.
B) The Allowance for uncollectible accounts is reported as a current expense.
C) The Allowance for uncollectible accounts is reported as a separate line item under current assets.
D) Accounts receivable is shown under current assets, net of the allowance for uncollectible accounts.

Question

Quizplus · Accepted Answer

The proper balance sheet treatment of the Allowance for uncollectible accounts is to show accounts receivable under current assets, net of the allowance for uncollectible accounts. This means that the allowance is deducted from the amount of accounts receivable to show the estimated portion of uncollectible accounts. Therefore, option D is the correct statement. Option A is incorrect because the allowance is not a liability but rather a contra-asset account. Option B is incorrect because the allowance is not an expense but rather an estimation of a reduction in assets. Option C is also incorrect because the allowance is not shown as a separate line item but rather deducted from the accounts receivable amount.

Which of the Following Is TRUE of the Proper Balance