Question

the aging of accounts receivable method is used to estimate bad debts at a certain firm. when accounting staff members total the estimated bad debts from the aging schedule, they have determined:

Answer 1

what should be the current balance in Allowance for Doubtful Accounts. The balance sheet's total receivables are netted against an allowance for doubtful accounts to show only the amounts anticipated to be paid.

The balance sheet's total receivables are netted against an allowance for doubtful accounts to show only the amounts anticipated to be paid. Estimated by the provision for doubtful accounts is the proportion of receivables that are anticipated to be uncollectible. However, the allowance estimate may be significantly off from how customers really pay.

Regardless of corporate policies and practices for credit collections, a transaction involving credit always has the risk of not being paid. A allowance corporation must therefore recognize this risk by creating a provision for doubtful accounts and offsetting bad debt expenditure. This complies with the matching principle of accounting by guaranteeing that costs associated with the sale are recorded during the same accounting period during which revenue is collected. Companies can estimate the true worth of their account receivables with greater accuracy thanks to the provision for dubious accounts.

Learn more about doubtful accounts here

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