If the balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in
A) No effect on the expenses of the current period
B) A reduction in current assets
C) A reduction in owner's equity
D) An increase in the expenses of the current period
E) A reduction in current liabilities

Question

Quizplus · Accepted Answer

When the balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, it means that the company has already reserved more funds than necessary to cover the bad debts. Therefore, no additional expense needs to be recognized for the current period. The write-off against the allowance account reduces both the allowance account (an asset) and accounts receivable (a current asset), resulting in no net effect on current assets. It also does not affect owner's equity or current liabilities.

If the Balance of the Allowance for Doubtful Accounts Account