If actual write-offs are significantly higher or lower than estimated uncollectible accounts over a number of periods, a large debit or credit balance will accumulate in the allowance for bad debts account.

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If actual write-offs (the actual amount of accounts that cannot be collected) are different from the estimated uncollectible accounts (the amount that the company predicts will not be collected) over time, it will cause a difference between the amount in the allowance for bad debts account and the actual amount of bad debts. This will result in a large debit or credit balance in the allowance for bad debts account.

If Actual Write-Offs Are Significantly Higher or Lower Than Estimated