Allowance Account (Noun)
Meaning
A reserve fund created by a charge against profits in order to provide for changes in the value of a company's assets.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The company established an allowance account to offset potential losses from depreciation of its equipment assets.
- At the end of the year, the accounting department reviewed the allowance account to adjust for any changes in asset valuation.
- By allocating a portion of its annual profits to the allowance account, the firm was able to absorb unforeseen fluctuations in asset value.
- An allowance account helped the business to smooth out its income statements and avoid unexpected write-downs of its assets.
- The independent auditor scrutinized the company's allowance account to verify compliance with the accounting standards governing the reserve fund.