To ensure that the Allowance for Doubtful Accounts account does not become materially misstated over time,companies revise overestimates of prior periods by:
A)recording a retroactive correcting entry.
B)lowering estimates in the current period.
C)increasing estimates in the current period.
D)notifying the users of its financial statements of the error.

Question

Quizplus · Accepted Answer

Bad debt estimates always differ somewhat from the amounts that are later written off.To ensure that the Allowance for Doubtful Accounts account does not become materially misstated over time,companies revise overestimates of prior periods by lowering estimates in the current period.Alternatively,they would raise estimates in the current period to correct underestimates of prior periods.

To Ensure That the Allowance for Doubtful Accounts Account Does