DEFINITION of 'Allowance For Doubtful Accounts'. A contra-asset account that records the portion of a company's receivables, which it expects may not be collected. The allowance for doubtful accounts is only an estimate of the amount of accounts receivable which are expected to not be paid.or example, the company may identify that it expects 4% of its sales to become bad debt, and thus it will adjust the allowance for doubtful accounts each quarter to ensure that this expected loss is reflected on the company's financial statements.