Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 42 - No. 44)
What is the purpose of an allowance for doubtful accounts?
To estimate the amount of cash that the company will collect.
To provide a more accurate valuation of accounts receivable.
To reduce the company's tax liability.
To increase reported profits.
Explanation
It reflects the expectation that some accounts will not be paid.
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