Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 29 - No. 38)
If a company expects that a portion of their accounts receivable will not be collected, how should this be reflected in the financial statements?
Increase the value of assets.
Decrease the value of assets.
Increase net income.
Decrease liabilities.
Explanation
The allowance for doubtful accounts is a contra-asset account that reduces the net value of accounts receivable.
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