Which of the following is not true about the Allowance for Doubtful Accounts?
A)It is a contra asset account.
B)It is used instead of reducing accounts receivable directly.
C)It is debited when uncollectible accounts are written off.
D)It is a liability account.
E)It is credited when bad debts expense is estimated and recorded.

Question

Quizplus · Accepted Answer

The Allowance for Doubtful Accounts is a contra asset account used to offset the balance in accounts receivable in order to present a more realistic picture of the amount of receivables that are expected to be collected. It is used instead of reducing accounts receivable directly. When uncollectible accounts are written off, the Allowance for Doubtful Accounts is debited, and when bad debts expense is estimated and recorded, the Allowance for Doubtful Accounts is credited. However, it is not a liability account.

Which of the Following Is Not True About the Allowance