Final answer:
The allowance for doubtful accounts is a contra-asset account that reduces the value of accounts receivable and reflects estimated uncollectible amounts. It is not listed under 'Other Assets' but as a deduction from accounts receivable. The creation of this allowance impacts the income statement as an expense.
Step-by-step explanation:
On the balance sheet, the allowance for doubtful accounts does not appear under the heading "Other Assets." Instead, it is a contra-asset account that reduces the total value of accounts receivable. It is listed in the assets section, but as a deduction from the accounts receivable. The allowance represents an estimate of the amount of accounts receivable that may not be collectible. The creation of this allowance is recorded as an expense on the income statement under the name "bad debt expense" or "provision for doubtful accounts," reflecting the estimated cost of non-collectible accounts receivable.
The balance sheet money listed under assets may not be in the bank because assets can include cash reserves, loans made to customers, and various bonds. These are all considered assets even though they may not be present as cash. Bank assets also consider potential loan defaults; hence, some assets listed such as loans may not be fully recoverable. A well-run bank accounts for this risk by setting aside a portion of its income as an allowance for potential defaults, which is reflected on the balance sheet.