The allowance for doubtful accounts is a:

A Liability

B Contra-asset account that reduces accounts receivable to net realizable value

C Revenue account

D Expense account

✓ Correct Answer: Option B

Allowance for doubtful accounts is contra-asset, reducing gross AR to the amount expected to be collected (NRV).

💡 Why is B) the correct answer?

The correct answer to the question "The allowance for doubtful accounts is a:" is Option B: Contra-asset account that reduces accounts receivable to net realizable value.

The other options — A) Liability, C) Revenue account, D) Expense account — are incorrect for this CPA Exam Prep question. As explained above: Allowance for doubtful accounts is contra-asset, reducing gross AR to the amount expected to be collected (NRV).

📚 About This CPA Exam Prep Practice Question

This 1-level CPA Exam Prep question from the Financial Accounting (FAR) topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CPA Exam Prep practice test or use flashcards for spaced repetition review.

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The allowance for doubtful accounts is a:

✓ Correct Answer: Option B

📚 About This CPA Exam Prep Practice Question

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