Chapter 9, Problem 6DQ

To determine

Allowance for Doubtful Accounts:

The amount reduced from the total value of accounts receivable that are perceived by the authorities that they will not be repaid by the customers. When the allowance is recorded consecutively with the sale the anticipated bad debts gets matched towards the sales made for the accounting period and thus reflects the true picture of profitability of the company.

To explain:

Reason for bad debts accounts to not have the same adjusted balance as the allowance for doubtful accounts.