Which of the following is true about a credit balance in Allowance for Doubtful Accounts at the end of a year?
A) More accounts receivable were actually written off as uncollectible during the year than estimated previously.
B) Bad debts expense in the period was overstated and net income was understated.
C) Bad debts expense in the period was understated and net income was overstated.
D) Accounts receivable estimated as uncollectible is equal to the bad debts expense written off during the year.

Question

Quizplus · Accepted Answer

A credit balance in the Allowance for Doubtful Accounts indicates that the bad debts expense was overestimated, leading to an overstatement of expenses and an understatement of net income.

Which of the Following Is True About a Credit Balance