Evaluation value of accounts receivable, which won't be received.
An offset, or contra account, to accounts receivable to reflect the estimated collection losses on outstanding accounts receivable. The allowance reduces revenue. Such an allowance is generally not allowed for tax purposes. Also known as an allowance for bad debts and allowance for uncollectible accounts.
The balance sheet account that measures the amount of outstanding accounts receivable expected to be uncollectable. altruistic motivation: the motive for action that is especially concerned with the well-being of others
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts Receivable the result is known as the net realizable value of the Accounts Receivable. The credit balance in this account comes from the entry wherein Bad Debt Expense is debited. The amount in this entry may be a percentage of sales or it might be based on an aging analysis of the accounts receivables (also referred to as a percentage of receivables). When the allowance account is used, the company is anticipating that some accounts will be uncollectible in advance of knowing the specific account. As a result the bad debt expense is more closely matched to the sale. When a specific account is identified as uncollectible, the Allowance for Doubtful Accounts should be debited and Accounts Receivable should be credited. To Top