However, accountants usually cant decrease the Accounts Receivable account directly because they dont know which customers will
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However, accountants usually can’t decrease the Accounts Receivable account directly because they don’t know which customers will not pay their bills. Therefore, accountants usually set up a separate account, called Allowance for Doubtful Accounts . They record the estimated amount of bad debts as an increase in this account. Accounts Receivable, like all asset accounts, has a [debit / credit] balance.
Allowance for Doubtful Accounts, which is subtracted from Accounts Receivable, therefore must have the opposite balance; that is, a [debit /
credit] balance.
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