Allowance for Doubtful Accounts and Bad Debts Expense Part 2 (Financial Accounting Tutorial #42)

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I summarize the reason as to why we use the allowance method in this video as well as outline the accounts we'll use to adjust our overstated receivables and net income. This video will begin to talk about Bad Debts Expense (affecting the net income statement) and Allowance For Doubtful Accounts (affecting the balance sheet) which will match our expenses and comply with the matching principle but ALSO give us the net realizable value for our receivables.

These two accounts are used whenever we want to make an estimation regarding bad debts or uncollectible accounts.

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