Question

The Allowance for Doubtful Accounts represents: Multiple Choice Cash set aside to make up for bad debt losses. A. The difference between the face value of accounts receivable and the net realizable value of accounts receivable. B. The difference between total credit sales and collections on credit sales. C. The amount of uncollectible accounts written off to date.

Answer 1

Answer:

The difference between the face value of accounts receivable and the net realizable value of accounts receivable.

Explanation:

The allowance for doubtful debt represents the balance of credit sales to customers that may be uncollectible. Once determined, the entries required are

Debt Bad debt expense  (P/L)

Credit Doubtful debt allowance (B/S).

Hence Allowance for Doubtful Accounts represents the difference between the face value of accounts receivable and the net realizable value of accounts receivable.