The Allowance for Doubtful Accounts will have a debit balance before adjustments when:
A)the company increased its collection efforts.
B)the company recovered some accounts previously written off.
C)bad debts were underestimated at the end of the prior period.
D)bad debts were overestimated at the end of the prior period.

Question

Quizplus · Accepted Answer

Although the Allowance for Doubtful Accounts normally has a credit balance,it may have a debit balance before it is adjusted.This happens when a company has recorded write-offs that exceed previous estimates of uncollectible accounts.Increased collection efforts,recovery of previously written off accounts,and overestimated bad debts are more likely associated with credit balances in the Allowance for Doubtful Accounts.

The Allowance for Doubtful Accounts Will Have a Debit Balance