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Allowance for Doubtful Accounts

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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?

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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.

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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 ...

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