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The appearance of Allowance for doubtful accounts on a financial statement indicates what basis of accounting?
Wiki User
∙ 13y ago
From my understanding, the use of ADA is a sign of accrual basis accounting. Accrual Accounting records all transactions as they are made, even when cash is not collected or paid out. ADA is used for customers who have purchased on credit and what the company can reasonably expect to be noncollectable.
In cash basis accounting, you would not need ADA because there are no "credit" sales recorded. All sales recorded or recorded only when cash is received.
Wiki User
∙ 13y ago
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