Question

Which of the following statements about allowance for doubtful accounts is false?

1) It is a contra asset account
2) It is reported on the balance sheet
3) It represents an estimate of uncollectible accounts receivable
4) It is recorded as an expense on the income statement

Answer 1

The false statement about allowance for doubtful accounts is that it is recorded as an expense on the income statement.

Step-by-step explanation:

Out of the given statements, the false statement about allowance for doubtful accounts is: 4) It is recorded as an expense on the income statement.

Allowance for doubtful accounts is a contra asset account and is reported on the balance sheet. It represents an estimate of uncollectible accounts receivable. When there is a probability of some accounts not being paid, companies create an allowance for doubtful accounts to reflect this potential loss. This allowance is deducted from accounts receivable on the balance sheet.