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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

What kind of an account (asset, liability, etc.) is Allowance for Doubtful Accounts, and is its normal balance a debit or a credit?

To determine

Allowance method

It is a method for accounting for uncollectible receivables, where uncollectible accounts receivables are estimated and recorded at the end of particular period. The operating expenses resulted from uncollectible receivables are often called as bad debt expenses.

To identify: The kind of an account for allowance for doubtful accounts, and its normal balance.

Explanation

Particular customer accounts cannot be canceled, decreased or credited, since it is not possible to identify, which specific customer’s accounts receivable will be uncollectible. Hence, instead of crediting accounts receivable, a contra asset a...

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