The Allowance for Bad Debts account has a debit balance of $8,000 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $12,000. What will be the amount of the adjustment in the Allowance for Bad Debts account?

Question

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The adjustment amount is calculated by taking the desired ending balance ($12,000) and subtracting the current debit balance (-$8,000), resulting in a $20,000 adjustment to switch the account to the correct credit balance.

The Allowance for Bad Debts Account Has a Debit Balance