At the end of the fiscal period, the account debited to show the estimated amount of uncollectible accounts is:
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A. B. C. D. E.A
The adjusting entry should recognize an expense and increase the allowance account.
The correct answer is E. Allowance for Uncollectible Accounts.
The estimated amount of uncollectible accounts is typically recorded using an account called the "Allowance for Uncollectible Accounts" or "Allowance for Doubtful Accounts." This account is used to recognize the fact that not all customers will pay their outstanding debts in full, and it serves as a contra-asset account to reduce the reported value of Accounts Receivable.
The allowance for uncollectible accounts is established through an estimation process known as the allowance method. Under this method, a company analyzes its historical collection experience and the creditworthiness of its customers to estimate the percentage of accounts receivable that is likely to be uncollectible.
When the estimate is made, the company records an adjusting entry to recognize the estimated amount of uncollectible accounts. This entry typically involves a debit to an expense account called "Bad Debt Expense" (Answer A) and a credit to the allowance for uncollectible accounts.
The debit to the Bad Debt Expense account (Answer A) represents the recognition of the expense associated with uncollectible accounts. This expense is matched with the related revenue in the same accounting period to comply with the matching principle.
On the other hand, the credit is made to the Allowance for Uncollectible Accounts (Answer E). This credit increases the balance of the allowance account, reducing the reported value of Accounts Receivable on the balance sheet.
Therefore, at the end of the fiscal period, the account debited to show the estimated amount of uncollectible accounts is Bad Debt Expense (Answer A), while the account credited is Allowance for Uncollectible Accounts (Answer E).