Question

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?...

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

A.

The account is a contra account.
B.

The account is a temporary account.
C.

The amount of the Allowance for Doubtful Accounts decreases the net realizable value of a company's receivables.
D.

The account is increased by an estimate of uncollectible accounts expense.
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Answer #1

Answer: B) This Account is a Temporary account.

Allowance for doubtful accounts is not the temporary accounts. It is a permanent account which is recorded in the balance sheet of the firm. Allowance for the doubtful accounts is the expected amount of uncollectable amount on accounts receivables. This amount must be reduced from the account receivables in order to make the accurate financial statement. Balance sheet items are normally permanent in nature. Income Statment items are temporary in nature.

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