Allowance for Doubtful Accounts Asset Or Liabilities

Allowance for Doubtful Accounts or Provision For Doubtful Debts are neither Assets nor Liabilities but these are, in fact, Contra Assets Accounts which is just an estimated amount of Uncollectible Accounts Receivable taken from Accounts Receivable and it is calculated on the basis of either income statement-approach or balance sheet-approach. After that, it is deducted from closing balance of Accounts Receivable on the balance sheet in order to calculate the net realizable value of accounts receivable.

Also, the allowance for doubtful accounts is the requirement of Matching principle to match sales with the uncollectible accounts expense on Income Statement.