If actual bad debts are more than the provision for bad debts, then there will be a_____________?
Correct answer: B. Debit balance of Provision for Bad Debts Account
- A. Credit balance of Provision for Bad Debts Account
- B. Debit balance of Provision for Bad Debts Account
- C. Debit balance of Bad Debts Account
- D. Debit balance of Discount on Debtors AccountCredit & Lending
Explanation
If actual bad debts exceed the existing provision, the provision account is insufficient to cover the write-off and shows a debit balance for the shortfall. A credit balance would indicate that the provision exceeded the amount used.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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