When a company uses the allowance method to measure bad debts,________.
A) the Bad Debts Expense account is debited when an account is written off
B) the amount of bad debts expense is estimated at the end of the accounting period
C) the normal balance in the Allowance for Bad Debts account is a debit
D) the amount of bad debts expense is not estimated at the end of the accounting period

Question

Quizplus · Accepted Answer

When a company uses the allowance method to measure bad debts, the amount of bad debts expense is estimated at the end of the accounting period. This is done by estimating the amount of uncollectible accounts based on past experience and the current status of accounts receivable. The Allowance for Bad Debts account is used to record this estimated amount, and the Bad Debts Expense account is debited when an account is actually deemed uncollectible and written off. The normal balance in the Allowance for Bad Debts account is a credit, not a debit.

When a Company Uses the Allowance Method to Measure Bad