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Is Allowance For Doubtful Accounts and Accumulated Depreciation Similar?
Wiki User
∙ 13y ago
Yes.... and no. I guess it depends how you are meaning this, specifically.
They are both "contra-asset" accounts, however, they are for different things.
Allowance for Doubtful Accounts ("ADA") is the estimated amount of your accounts receivable (the money that people owe you) that you suspect will not be paid. Accumulated Depreciation is the total depreciation on your asset (building, equipment, etc. -- NOTE: Land does NOT depreciate.) since you record the asset at its historical cost (the amount you paid for it).
So, while both are contra-asset accounts, they have very different uses behind them.
Wiki User
∙ 13y ago
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What part of balance sheet is allowance for doubtful accounts reported?
The allowance for doubtful accounts is a reduction to the accounts receivable. This is a contra account, similar to accumulated depreciation.
Is allowance for doubtful accounts included in Balance sheet?
Yes allowance for doubtful accounts is shown in balance sheet
How do you record allowance for doubtful accounts?
Recording an allowance for doubtful accounts can vary depending on the chart of accounts for the specific place of business. Usually to record an allowance for a doubtful account is to debit revenue and credit the write off account.
What is the normal balance for allowance for doubtful accounts?
Credit
Why do we have an allowance for doubtful accounts?
To make sure we don't run out of money for continuing operations in the event that doubtful accounts do not pay.
What part of balance sheet is allowance for doubtful accounts reported?
The allowance for doubtful accounts is a reduction to the accounts receivable. This is a contra account, similar to accumulated depreciation.
Definition of contra assets?
Contra assets are asset accounts with creditbalances. (A credit balance in an asset account is contrary-or contra-to an asset account's usual debit balance.) Examples of contra asset accounts include: * Allowance for Doubtful Accounts * Accumulated Depreciation-Land Improvements * Accumulated Depreciation-Buildings * Accumulated Depreciation-Equipment * Accumulated Depletion * Etc. source: http://www.accountingcoach.com/online-accounting-course/05Xpg01.html -- amir
What are the examples of contra account?
Examples of Contra Accounts are Accumulated Depreciation and Provision for Doubtful Debts
Is allowance for doubtful accounts included in Balance sheet?
Yes allowance for doubtful accounts is shown in balance sheet
How do you record allowance for doubtful accounts?
Recording an allowance for doubtful accounts can vary depending on the chart of accounts for the specific place of business. Usually to record an allowance for a doubtful account is to debit revenue and credit the write off account.
What is the normal balance for allowance for doubtful accounts?
Credit
Why do we have an allowance for doubtful accounts?
To make sure we don't run out of money for continuing operations in the event that doubtful accounts do not pay.
What is Accounts Receivable Netting?
It is basically deducting the allowance for doubtful accounts from the total accounts receivable.
If Allowance for doubtful accounts increased why would allowance for doubtful accounts as a percentage of accounts receivable decrease as well?
If you started the period with 10,000 in A/R with a 1,000 allowance for bad debts (10%) and then determined that 5% was an adequate allowance but A/R at the end of the period was 50,000, you would still have to increase your allowance by 1,500 to a balance of 2,500.
Would a decrease in the allowance for doubtful accounts increase profitability?
Answer:Yes. To increase the allowance for doubtful accounts, expenses are incurred. Uncollectible accounts expense is debited, and the allowance is credited.The allowance is a buffer to absorb defaults. If the allowance is too high, the journal entry to increase the allowance is reversed. In other words, a debit to the allowance, and a credit to the uncollectible accounts expense. The reversal increases net income (as expenses are reduced).
When is the Allowance for Doubtful Accounts adjusted?
Prior to the closing of financial year
What accounts receivable valuation method best demonstrates accounting conservatism?
Allowance for doubtful accounts
