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Maria, a student at a local state university is interning at a local CPA Firm. Maria is discussing the audit of accounts receivable and the

Maria, a student at a local state university is interning at a local CPA Firm. Maria is discussing the audit of accounts receivable and the related allowance accounts with her supervisor, audit manager Steven. Maria advises Steven that she remembers the professor discussing the allowance accounts in one of the lectures, but doesn't remember how these accounts are connected to accounts receivable. Which of the following represents Steven's best response to this question?
All accounts receivable accounts have an allowance account associated with them. The reason for this is to record bad debt expense as and when customers don't pay their bills owed to the client.
The relationship between the allowance accounts and accounts receivable is such that when accounts receivable turnover increases, the allowance is usually also increased. This is an application of the accounting principles of conservatism.
The allowance account for accounts receivable exists because in the normal course of business, some customers ultimately do not remit the balances they owe to the client. The client attempts to estimate this ahead of time; hence the need for an allowance account.
The allowance accounts for accounts receivable are created to provide a preemptive estimate of bad debt expense that the client will ultimately have to record. The relationship between the allowance accounts and bad debt expense is inverse, so when an allowance account increases, bad debt expense decreases and vice-versa.
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