The balance of the Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debts Expense
A)is relevant when using the percentage of receivables basis.
B)is relevant when debit card sales are made.
C)is relevant when notes receivable are used.
D)will never show a debit balance at this stage in the accounting cycle.

Question

Quizplus · Accepted Answer

The balance of the Allowance for Doubtful Accounts is relevant when using the percentage of receivables basis as it helps to determine the amount of bad debt expense to be recorded. It is not relevant when debit card sales are made or notes receivable are used. The balance of the Allowance for Doubtful Accounts can show a debit balance at this stage in the accounting cycle if the company has a history of high bad debts or if the estimate for the allowance is lower than it should be.

The Balance of the Allowance for Doubtful Accounts Prior to Making