The journal entry for the Allowance for Doubtful Accounts (ADA) involves debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts. This entry reflects the estimated amount of accounts receivable that may not be collected, adjusting the balance sheet to accurately reflect the net realizable value of receivables. It is essential for financial reporting to ensure proper valuation and transparency regarding potential losses from uncollectible accounts.
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