Final answer:
Yes, estimates for bad debts are corrected to reconcile with the actual uncollectible accounts written off, ensuring financial statements are accurate.
Step-by-step explanation:
Estimates for bad debts are indeed adjusted if they are found to be inaccurate compared to the actual uncollectible accounts that are written off during an accounting period. When a business extends credit to its customers, there's always a risk that some accounts receivable will not be collected. Accountants use estimates to predict the amount of these uncollectible accounts, which is often based on historical data. This process is part of the Allowance Method for accounting for bad debts.
At the end of each accounting period, the estimated uncollectible amount is reconciled with the actual bad debts encountered. If the actual uncollectible amount is higher than the estimated, the business must increase the allowance for doubtful accounts, which will increase the bad debt expense. Conversely, if the actual amount is lower, the allowance can be decreased, reducing the bad debt expense. This is important for providing more accurate financial information and for ensuring that financial statements reflect a true and fair view of the company's financial position.