Question

The allowance for uncollectible accounts is:

A. An expense.
B. A contra asset account.
C. A contra revenue account.
D. A liability account.

Answer 1

The allowance for uncollectible accounts is a contra asset account that reduces the balance of accounts receivable.

Step-by-step explanation:

The allowance for uncollectible accounts is a contra asset account, which means it is an account that offsets or reduces the balance of another asset account. In this case, it is used to reduce the balance of accounts receivable to reflect the amount that is expected to be uncollectible. This allowance is reported on the balance sheet as a deduction from accounts receivable. It is important for companies to estimate and set aside this allowance to properly reflect the value of their accounts receivable.