The adjustment for bad debts using the percentage of receivables ignored the debit balance in the Allowance account.This error would cause:
A)total assets to be overstated.
B)total liabilities to be understated.
C)net income to be understated.
D)None of these is correct.

Question

Quizplus · Accepted Answer

Ignoring the debit balance in the Allowance for Doubtful Accounts would result in an insufficient adjustment for bad debts, leading to an overstatement of accounts receivable and thus total assets.

The Adjustment for Bad Debts Using the Percentage of Receivables