The balance in Allowance for Doubtful Accounts would have a debit balance when
A)the percentage of receivables basis is used.
B)an uncollectible account is later recovered.
C)write offs during the year have been less than previous provisions.
D)write offs during the year have exceeded previous provisions.

Question

Quizplus · Accepted Answer

The Allowance for Doubtful Accounts typically has a credit balance, as it is a contra account to Accounts Receivable, reducing the net amount of receivables that are expected to be collected. However, if the actual write-offs during the year exceed the previous provisions (amounts set aside in the allowance account), the account could end up with a debit balance, indicating that the losses from uncollectible accounts were underestimated.

The Balance in Allowance for Doubtful Accounts Would Have a Debit