Accounting Dictionary - Letter A
(also called allowance for bad debts or reserve for bad debts) is an entity's best estimate of uncollectible accounts receivable. Allowance for doubtful accounts is determined based on historical or current data about the company's financial activity. Allowance for doubtful accounts is presented in the assets section of the balance sheet and is subtracted from gross accounts receivable to arrive at the net realizable value of accounts receivable (i.e., amount expected to be collected)
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