[kellybartch1]

Someone is the manager of a medium size company. A few years ago, the manager persuaded the owner to base a part of her compensation on the net income the company earns each year. Each December she estimates year-end financial figures in anticipation of the bonus she will receive. If the bonus is not as high as she would like, she offers several recommendations to the accountant for the year-end adjustments. One of her favorite recommendations is for the controller to reduce the estimate of doubtful accounts. What effects does lowering the estimate for doubtful accounts have on the income statement and balance sheet?

[jeffp]

The current year allowance has the effect of reducing net income so reducing the allowance adds to net income

[sajalarora]

Doubtful accounts are usually opened for any future loss which may be estimated to occur in future .
As per prudence principal , such doubtful accounts are set off from the curent year profir or loss.
As a result of which , profits of the year are reduced by the amount of such accounts are created.
While , in the balance sheet such doubtful amounts are set off against the assets for which it is created.

In brief,
In profit & loss A/c ---dr the doubtful a/c

In balance sheet ----respective asset A/c (-) doubtful amount