A positive balance in the allowance for uncollectible accounts before an adjusting entry for bad debts expense is recorded means management understated its bad debts expense in the prior period.

Question

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A positive balance in the allowance for uncollectible accounts means that more money was reserved for bad debts than was actually written off as uncollectible in the prior period, indicating that bad debts expense was understated.

A Positive Balance in the Allowance for Uncollectible Accounts Before