Allowance for Doubtful Accounts is a(n) -asset account and has a normal balance. (Enter only one word per blank.)

Allowance for Doubtful Accounts is a contra asset account and has a normal credit balance.

Explanation

The Allowance for Doubtful Accounts is used to estimate and account for potential losses in accounts receivable due to customers not paying their debts. It is classified as a contra asset account because it reduces the total amount of accounts receivable reported on the balance sheet. Unlike regular asset accounts that typically carry a debit balance, contra asset accounts maintain a credit balance. This means that when recording an estimated doubtful account, the entry would involve increasing the allowance account with a credit, while simultaneously recognizing an expense (Bad Debt Expense) with a debit. This practice adheres to the matching principle in accounting, ensuring that expenses are recognized in the same period that the related revenues are earned.