The balance of the Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debts Expense
A)is relevant when using the percentage of receivables basis.
B)is relevant when debit card sales are made.
C)is relevant when notes receivable are used.
D)never shows a debit balance at this stage in the accounting cycle.

Question

Quizplus · Accepted Answer

The balance of the Allowance for Doubtful Accounts is relevant when using the percentage of receivables basis because it is adjusted based on the estimated percentage of outstanding receivables that are expected to become uncollectible. This method directly considers the existing balance in the allowance account before making the adjustment.

The Balance of the Allowance for Doubtful Accounts Prior to Making