Because the allowance for doubtful accounts is an estimate that affects the value of a firm's accounts receivable, many accountants will feel pressure to underestimate this value. Underestimation of the allowance for doubtful accounts will make a company look more profitable than it actually is.
Some texts will refer to the allowance for doubtful accounts as the allowance for bad debt. You should recognize both names, as both are used in practice. Fortunately they mean the exact same thing and can be used interchangeably.
Note that there is another method to write off bad debt called the direct write off method. Unlike the method presented here, the direct write off method does not comply with the GAAP standard.