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Commonly Asked Questions about Allowance for doubtful accounts Balance Sheet Templates

An allowance for doubtful accounts is considered a contra asset, because it reduces the amount of an asset, in this case the accounts receivable. The allowance, sometimes called a bad debt reserve, represents managements estimate of the amount of accounts receivable that will not be paid by customers.
The amount is reflected on a companys balance sheet as Allowance For Doubtful Accounts, in the assets section, directly below the Accounts Receivable line item. Doubtful accounts are considered to be a contra account, meaning an account that reflects a zero or credit balance.
You record the allowance for doubtful accounts by debiting the Bad Debt Expense account and crediting the Allowance for Doubtful Accounts account. Youll notice the allowance account has a natural credit balance and will increase when credited.
When you create an allowance for doubtful accounts, you must record the amount on your business balance sheet. If the doubtful debt turns into a bad debt, record it as an expense on your income statement.
Allowance for doubtful accounts is a dollar amount companies deduct from their receivables to account for unpaid invoices or debt. AFDA is also called a bad debt reserve. Accountants list AFDA on the balance sheet as a contra-asset. A contra-asset decreases the dollar amount of the asset with which it is paired.
An allowance for doubtful accounts is a contra account that nets against the total receivables presented on the balance sheet to reflect only the amounts expected to be paid. The allowance for doubtful accounts estimates the percentage of accounts receivable that are expected to be uncollectible.
Allowance for Doubtful Accounts is a contra-asset account that shows up right after the Accounts Receivable amount on the Current Assets section of the balance sheet. The Allowance for Doubtful Accounts amount is then deducted from the total Accounts Receivable to produce Net Realizable Accounts Receivable.