Which of the following statements about the Allowance for Doubtful Accounts is correct?

a. The Allowance for Doubtful Accounts is a contra-revenue account.

b. The Allowance for Doubtful Accounts is credited when a specific write-off is recorded.

c. Under the aging of accounts receivable method, Bad Debt Expense is calculated and then added to the beginning balance in the Allowance for Doubtful Accounts.

d. The Allowance for Doubtful Accounts has a normal credit balance.

Question

Red Velvet

Business

12 September, 22:51

Which of the following statements about the Allowance for Doubtful Accounts is correct?

a. The Allowance for Doubtful Accounts is a contra-revenue account.

b. The Allowance for Doubtful Accounts is credited when a specific write-off is recorded.

c. Under the aging of accounts receivable method, Bad Debt Expense is calculated and then added to the beginning balance in the Allowance for Doubtful Accounts.

d. The Allowance for Doubtful Accounts has a normal credit balance.

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Answers (1)

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Mathias Hahn · Answer 1

d. The Allowance for Doubtful Accounts has a normal credit balance

Explanation:

Allowance for Doubtful Accounts is a contra asset account and it normally has a credit balance which is adjusted in the debit balance of account receivables. When a write off is recorded this account is debited to record the effect in this account. Under aging method nothing is done with this account, aging method calculates the value and record it. Normally this account has credit balance but sometimes it might have a debit balance when a write off greater than the account balance is recorded.