Allowance for Doubtful Accounts (AFDA)

The allowance for doubtful accounts is a contra-asset account on a company’s balance sheet. AFDA represents the estimated amount of accounts receivable that the company does not expect to collect from its customers. The purpose of the allowance for doubtful accounts is to provide a more realistic value for the accounts receivable by accounting for the potential risk of uncollectible debts.

AFDA on the Balance Sheet Related Resources