The Allowance for Doubtful Accounts is necessary because
A)when recording bad debt expense it is not possible to know which specific accounts will not pay.
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 necessary because when recording bad debt expense it is not possible to know which specific accounts will not pay. Therefore, an estimate is made and recorded in the allowance account. This ensures that the company's financial statements reflect a more realistic value of accounts receivable.

The Allowance for Doubtful Accounts Is Necessary Because