A debit balance in the Allowance for Doubtful Accounts
A) is the normal balance for that account.
B) indicates that actual bad debt write-offs have been less than what was estimated.
C) cannot occur if the percentage of receivables method of estimating bad debts is used.
D) indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

Question

Quizplus · Accepted Answer

A debit balance in the Allowance for Doubtful Accounts indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. This means that more customers have defaulted on their payments than previously estimated, requiring a higher provision for bad debts.

A Debit Balance in the Allowance for Doubtful Accounts