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Korvikt [17]
3 years ago
13

The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based

on an estimate of bad debts, is an application of the
Business
1 answer:
Reika [66]3 years ago
3 0

Answer:

The answer is: application of matching principle and contra-asset

Explanation:

The allowance for doubtful accounts is a management estimate of bad debts (amount owed by the customers that is deemed uncollectible). In order to demonstrate the recoverable amount of the accounts receivable, it is usually applied as a reduction in the asset (accounts receivable) by applying contra asset (that is, a way of netting the two accounts).

The estimate of bad debt is in conformity with the matching principle of accounting. The principle states that the revenue generated in a particular accounting period must be matched against the expense for that particular period. In this instance, the the bad debt expense is the expense.

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Answer:

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Therefore the ROE can be calculated as follows

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= 1.4 × 1.8 × 7

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