A debit balance in the Allowance for Doubtful Accounts

Question: A debit balance in the Allowance for Doubtful Accounts

1. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
2. is the normal balance for that account.
3. cannot occur if the percentage of receivables method of estimating bad debts is used.
4. indicates that actual bad debt write-offs have been less than what was estimated.

Answer and Explanation