A debit balance in Allowance for Doubtful Accounts
A) is the normal balance for that account
B) indicates that actual bad debt write-offs have been less than what was estimated
C) cannot occur if the percentage of receivables method of estimating bad debts is used
D) indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

Question

Quizplus · Accepted Answer

A debit balance in Allowance for Doubtful Accounts indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. This means that the company has already estimated and set aside funds for potential bad debt write-offs, but the actual write-offs have surpassed their estimates, resulting in a debit balance in the account.

A Debit Balance in Allowance for Doubtful Accounts