Accounting for IGCSE & O level - Final Statements (Section 14 - No. 4)
What is the purpose of the 'Allowance for Doubtful Accounts'?
To inflate sales revenue.
To reduce the reported value of accounts receivable.
To record future cash sales.
To increase the company's working capital.
Explanation
The allowance reduces accounts receivable by estimating uncollectible amounts.