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

The Allowance for Doubtful Accounts is a contra asset account that equals:

the amount of credit sales made during the period

the estimated amount of accounts receivable that is expected to be uncollectible

the cash collected from customers during the period

the total amount of accounts receivable outstanding

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Verified step by step guidance

Understand the concept of a contra asset account: A contra asset account is used to reduce the balance of a related asset account. In this case, the Allowance for Doubtful Accounts reduces the Accounts Receivable balance to reflect the amount expected to be collectible.

Recognize the purpose of the Allowance for Doubtful Accounts: It represents the estimated amount of accounts receivable that is expected to be uncollectible due to customers' inability or unwillingness to pay.

Eliminate incorrect options: The Allowance for Doubtful Accounts is not directly related to the amount of credit sales made during the period, nor is it tied to the cash collected from customers. These are separate financial metrics.

Clarify the relationship with Accounts Receivable: The Allowance for Doubtful Accounts is subtracted from the total Accounts Receivable to calculate the net realizable value of receivables, which is the amount expected to be collected.

Conclude the correct answer: The Allowance for Doubtful Accounts equals the estimated amount of accounts receivable that is expected to be uncollectible, as this aligns with its purpose and function in financial accounting.