Allowance for Uncollectible Accounts

The Allowance for Uncollectible Accounts is an estimate of the dollar amount of your accounts receivable will never be collected.

When you extend credit to customers there will always be some who don’t pay. Companies estimate the amount they will never receive so they will have a more accurate idea of their cash flow. Some companies figure this number by taking a percentage of their credit accounts and some figure it by aging the receivables.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/allowance-for-uncollectible-accounts/