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

Question

Quizplus · Accepted Answer

A debit balance in the Allowance for Doubtful Accounts indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. This means that the company estimated a certain amount of bad debts, but the actual write-offs were higher than expected, resulting in a debit balance in the allowance account. This is an indication that the company may need to increase its provision for bad debts in the future.

A Debit Balance in the Allowance for Doubtful Accounts