The client's estimate of the total amount of uncollectible receivables is represented by:
A) the bad debts expense account on the income statement.
B) the provision for doubtful debts account.
C) the accounts with credit balances in the accounts receivable subsidiary ledger.
D) footnote disclosure in the financial statements.

Question

Quizplus · Accepted Answer

The provision for doubtful debts account represents the estimated amount of uncollectible receivables. This account is a contra-asset account that is used to reduce the gross amount of accounts receivable. The bad debts expense account on the income statement represents the amount of actual write-offs during a period, not the estimated total amount of uncollectible receivables. The accounts with credit balances in the accounts receivable subsidiary ledger represent overpayments, not uncollectible amounts. Footnote disclosure may provide additional information, but it is not the primary representation of the estimated total amount of uncollectible receivables.

The Client's Estimate of the Total Amount of Uncollectible Receivables