A Debit Balance in the Allowance for Doubtful Accounts

question 27

Multiple Choice

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 exceeded previous provisions for bad debts.
• C)indicates that actual bad debt write-offs have been less than what was estimated.
• D)cannot occur if the percentage of sales method of estimating bad debts is used.

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Definitions:

Revenue Recognition

The accounting principle that dictates the specific conditions under which income becomes recognized as revenue in the financial statements.

Secondary Characteristics

Refers to the additional properties or features of a financial instrument, entity, or market mechanism that support its primary functions.

Accounting Information

Data related to the financial transactions and status of an organization, used for analysis, decision making, and financial reporting.

Representational Faithfulness

A concept in accounting that assets and transactions are recorded and reported in a manner that accurately reflects economic reality.