Which of the following statements regarding allowance for doubtful accounts is true?
A) Under the aging of accounts receivable method, bad debt expense is calculated and then added to the beginning balance in the allowance for doubtful accounts.
B) The allowance for doubtful accounts is a contra-revenue account.
C) The allowance for doubtful accounts is credited when a specific write-off is recorded.
D) The allowance for doubtful accounts has a normal credit balance.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts has a normal credit balance. This means that the account is credited (increased) when the bad debt expense is recorded and debited (decreased) when a specific write-off is recorded. Option A is incorrect because under the aging of accounts receivable method, the allowance for doubtful accounts balance is calculated and then subtracted from the total accounts receivable to estimate the amount of bad debt. Option B is incorrect because the allowance for doubtful accounts is a contra-asset account, not a contra-revenue account. Option C is incorrect because the allowance for doubtful accounts is credited when bad debt expense is recorded, not when a specific write-off is recorded.

Which of the Following Statements Regarding Allowance for Doubtful Accounts