Question

Why does the Bad Debts Expense account usually not have the same adjusted balance as the Allowance for Doubtful Accounts?

Short answer

An adjusted balancerepresents the amount that organizations use toadjust the accounts of bad debt expenses.

Step-by-step solution

Step-by-Step SolutionStep 1: Introduction

An allowance for doubtful accounts is a type of allowance made out of an organization's total profit, to adjust the uncollectible balances.

Reason

The amount in a bad debt expense account is not the same as an allowance for doubtful accounts because an amount under a bad debt expense reflects the expense of a current period. On the other hand, an adjusted balance in an allowance for doubtful accounts contains the amount of the previous years.