Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

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Multiple Choice

What is the type of account and normal balance of the Allowance for Doubtful Accounts?

Contra-asset account with a credit balance

Asset account with a debit balance

Liability account with a credit balance

Revenue account with a credit balance

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Verified step by step guidance

Understand the concept of 'Allowance for Doubtful Accounts': This account is used to estimate the portion of accounts receivable that may not be collectible. It is a contra-asset account, meaning it reduces the value of a related asset account (Accounts Receivable).

Review the normal balance of a contra-asset account: Contra-asset accounts typically have a credit balance, which is opposite to the normal debit balance of asset accounts.

Analyze the options provided: The correct type of account and normal balance for 'Allowance for Doubtful Accounts' is a contra-asset account with a credit balance. This aligns with its purpose of offsetting the Accounts Receivable balance.

Eliminate incorrect options: An asset account with a debit balance is incorrect because 'Allowance for Doubtful Accounts' is not a regular asset account. A liability account with a credit balance is incorrect because this account does not represent a liability. A revenue account with a credit balance is incorrect because this account is not related to revenue.

Conclude the correct answer: Based on the analysis, the correct classification is 'Contra-asset account with a credit balance.' This reflects its role in financial accounting and its normal balance type.