What effect does lowering the estimate for doubtful accounts have on the income statement and/or balance sheet?
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What effect does lowering the estimate for doubtful accounts have on the income statement and/or balance sheet?
Here is the entry for recording the estimate-Dr. Expense(income statement a/c), Cr. Allowance(balance sheet a/c)
Lowering the estimate will lower the expense on income statement, which will higher the income.
Also, lowering the estimate will lower the allowance, a contra-asset account on the balance sheet, it will lead to a higher accounts receivable amount, which will higher the asset as a result.
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