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How To Calculate Allowance for Doubtful Accounts

Gaviti

Allowance for doubtful accounts (ADA) is a financial metric that estimates the value of rendered services or goods sold that you don’t expect to get paid for. Essentially, it’s a tool used in accrual accounting as a way of tracking bad debt up front with the end goal of maintaining more accurate financial statements.

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Guide To Accounts Receivable

Lendio

You will become very familiar with accounts receivable, sometimes abbreviated as AR, if you are a freelancer who gets paid via invoices or if you sell goods on credit. This means that your business was not paid for the goods or services immediately upon sale, but will rather be paid for them at some point in the future.