Question

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

Answer 1

Answer:D. Indicates that actual bad debts write off have been less than what was estimated.

Explanation:

On opening a provision for bad debt account, the initial provision is debited to income account and credited to provision for bad debt account to be deducted from the debtors at year end. However a decrease in actual debt recovery will need to be debited to the account to reduce it and credited to income statement to reduce the previous charges.