Asked by Spencer Hamer- on Jun 11, 2024

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Allowance for Doubtful Accounts is classified as a (n) ______ account and has a normal ______ balance.​

A) owner's equity, credit
B) contra asset, debit
C) owner's equity, debit
D) contra asset, credit

Allowance for Doubtful Accounts

A contra-asset account on a company's balance sheet that represents the amount of receivables the company expects may not be collected due to customer defaults.

Contra Asset

An account listed in a company's balance sheet that is used to reduce the balance of a related asset account, showing the amount that effectively reduces the original asset's value.

  • Understand the impact of the allowance method on financial statements.
  • Understand the classification and treatment of Allowance for Doubtful Accounts.
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BS
Brandon SauvalJun 17, 2024
Final Answer :
D
Explanation :
Allowance for Doubtful Accounts is a contra asset account, meaning it offsets the balance of an asset account (Accounts Receivable), and it normally has a credit balance because it reduces the total amount of receivables reported on the balance sheet.