Explore BrainMass

Explore BrainMass

    Allowance for Doubtful Accounts

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    At the end of the period, the Allowance for Doubtful Accounts has a debit balance of $4,600. What does this mean? What are implications of this balance if I am using the Percentage of Sales method? What if I am using the Percentage of Receivables method?

    © BrainMass Inc. brainmass.com June 3, 2020, 9:11 pm ad1c9bdddf

    Solution Preview

    Allowance for Doubtful Accounts usually has a credit balance when the bad debt expense is recorded. The journal entry is
    Bad Debt Expense Dr
    Allowance for Doubtful Accounts Cr
    When a account is written off, the debit goes to Allowance account and the journal entry is
    Allowance for Doubtful Accounts Dr
    Accounts Receivable Cr

    If the Allowance for Doubtful Accounts has a debit balance, this would imply that the write offs ...

    Solution Summary

    The solution explains the meaning of the debit balance in the allowance for doubtful debt account and the implication of this balance under percentage of sales and percentage of receivables method.