The allowance for doubtful accounts will have a debit balance before adjustments,when
A)the accountant has made a mistake.
B)bad debts were overestimated.
C)bad debts were underestimated.
D)the company recovered some accounts previously written off.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts is a contra asset account and the normal balance is a credit. However, if bad debts were underestimated (meaning the company did not set aside enough money for potential losses), the allowance for doubtful accounts will have a debit balance before adjustments. This is because the account has to be debited to increase the balance to the correct amount.

The Allowance for Doubtful Accounts Will Have a Debit Balance