Question

The Allowance for Doubtful Accounts: Multiple Choice Is credited when bad debts expense is estimated and recorded. All of the options are correct. Is a contra asset account. Is used instead of reducing accounts receivable directly.

Answer 1

Answer: All of the options are correct.

Explanation:

The Allowance for Doubtful Account is a contra account because it reduces the value of the Accounts Receivable Account and does so in order to account for the possibility that some customers will not pay the amounts they owe.

It is credited when Bad debts are estimated and recorded; that way this reduction in Accounts receivable does not have to go out of the Accounts Receivable account directly.This will ensure that the Accounts Receivable Account is not volatile as it attempts to keep up with all the bad debts incurred.