If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in:
A) No effect on the expenses of the current period.
B) A reduction in current liabilities.
C) An increase in the expenses of the current period.
D) A reduction in equity.
E) A reduction in current assets.

Question

Quizplus · Accepted Answer

When the credit balance of the Allowance for Doubtful Accounts exceeds the amount of a bad debt being written off, it means the company has already made sufficient provisions for bad debts in the past. Writing off a bad debt against the allowance account in such a situation will not have any effect on the expenses of the current period since the expense was already recognized in the period when the provision was made. It will also not result in a reduction in current liabilities, an increase in expenses of the current period, a reduction in equity, or a reduction in current assets.

If the Credit Balance of the Allowance for Doubtful Accounts